Tax year 2018/19 the £5000 Starting Savings Rate

Yorkshire_Pud

If eligible for the Starting Savings Rate on up to £5000 savings interest on which no income tax is due is this automatically applied by HMRC without the client notifying them or does the client have to inform HMRC that they 'think' it applies to them?

Thanks

Dazed_and_confused

I think HMRC are well aware of this tax rate.

Why do you think anyone would need to claim it? I pay some basic rate tax but haven't asked HMRC if it can be applied to me!

Do they have a tax code?

Do they file a Self Assessment return?

Yorkshire_Pud

Dazed_and_confused wrote: »

I think HMRC are well aware of this tax rate.

Why do you think anyone would need to claim it? I pay some basic rate tax but haven't asked HMRC if it can be applied to me!

Do they have a tax code?

Do they file a Self Assessment return?

Because they assessed a taxable amount on interest that was over the £1000 that everyone can get but well within the further £5000 that he 'should' get hence wondering if HMRC needed to be informed as they don't seem to have applied their knowledge properly in this case.

Has a tax code.

Doesn't file Self Assessment return.

Thanks!

Dazed_and_confused

Not everyone gets the £1,000.

Only people with income over £16,850 (current tax year) can make use of the savings nil rate (otherwise known as the Personal Savings Allowance).

And some very high earners don't even get any of the savings nil rate.

Is this really a question about a tax code, or a year end tax calculation, or something else?

There is s lot of confusion about tax codes and interest on this board and people are getting worked up for no reason!

If it is a tax code question then you could provide some details so we can work out if it's correct or not.

bowlhead99

Yorkshire_Pud wrote: »

Because they assessed a taxable amount on interest that was over the £1000 that everyone can get but well within the further £5000 that he 'should' get hence wondering if HMRC needed to be informed as they don't seem to have applied their knowledge properly in this case.

Has a tax code.

Doesn't file Self Assessment return.

HMRC do generally apply the rules correctly though it seems like each year there is some bug or glitch with the self assessment online returns which get moaned about in the forums and eventually fixed for the next year as long as they get enough complaints. Until something else breaks . Due to some mid year tax code change, I had to call to get my personal tax account to show the right amount owed after I had done my return this year, and then again when I modified my return.

Still, I haven't heard of the starting rate for savings interest being messed up for 2017/18, and it's the sort of thing that would affect huge numbers of people.

HMRC just need to be informed what he earns from all the various sources and then the amount of tax due will be known. You shouldn't need to tell them 'oh and by the way, the amount and type of income I have means I should pay x% tax on this and y% tax on that etc etc'. They know what the rates are.

Is your client sure he actually does qualify for the rate, rather than misunderstanding it as some people do? For example if you earn £20k including £18k of salary or pension income and £2k of interest... even though the £2k is less than £5k, you can't use any of the "starting rate for savings" band because your salary is occupying that space above your personal allowance and your savings/investment income is always the top slice of your total income.

If he does understand how it works the other thing to do is check HMRC have the correct total income for him and not some inaccurate estimate based on a previous year.

If he thinks they haven't applied their knowledge or the rules properly, he should probably just call them up or write to them and ask them to show them why he owes what they say he owes for the year. The calculation is quite simple if your affairs aren't complex.

xylophone

Links in post 9 may be worth a look.

https://forums.moneysavingexpert.com/discussion/comment/75436541#Comment_75436541

Yorkshire_Pud

The income, not including savings interest, is less than the personal allowance of £11850, therefore there is £6000 of savings interest allowed without tax. The HMRC tax code is indeed based on an estimate of interest based on the previous year. This amount was by his calculation about £2000. Same this year.
Their Note 2 does say they included any starter savings rate or personal savings allowance in their calculation.

Therefore it must be a gross over estimate of savings interest in the region of £7000 as they want tax paid on £1005.

Will suggest he phone HMRC or log in or open a personal tax account online with them to clarify.

Thanks for all the advices.

Dazed_and_confused

I think you have misunderstood or been confused by the tax code.

as they want tax paid on £1005.

Before they rush into anything and mess up their own tax code/records can you explain this? Is the tax code greater than the income it is being used against i.e. tax code 650L is the tax code for a pension of £6,000?

I think the tax code is almost certainly correct. Can you say what the code is and the income it is being used against before your friend/client does anything rash

Yorkshire_Pud

Sorted (probably!)

A call to HMRC established they had somehow turned interest total received on savings several years ago into non-coded income this year by mistake. Also he said the £5000 starting savings rate hadn't been applied. Interest on savings received last tax year had also been counted. Thus an in year tax liability of £1005 had wrongly arisen.

Tax code will return to previous correct one now the non existent non coded income has been removed.

Dazed_and_confused

If the non-coded income was high enough then that would mean that there would be no savings starter rate available.

With the non-coded income removed that could then mean the savings starter rate would be available.

I

Yorkshire_Pud

Income plus non coded income combined was well below £17850 so there would or should have been some savings starter rate available.

Reason I had originally wondered if the Starting Savings Rate had to be registered for by the client/individual was because MSE own write up on this topic mentions registering! That's the current updated one. However its now clear that it should be an automatic part of HMRC calculation.

They simply got this one wrong;)