Tax year 2018/19 the £5000 Starting Savings Rate

Goldiegirl

I think they may have made a mistake with my coding as well

I received a pension slip for February's pension, as my tax code had reduced. I looked online, and saw that a deduction had been made for £1007 interest earned. This would be about right.

I've already transferred 10% of my tax allowance to my husband, and even with this new £1007 deduction, my income is still well below my remaining tax allowance, so I have no tax liability.

However, being on a low income, I knew that I should have the £5000 starting savings rate too.

I phoned the tax office and the person I spoke to said the £5000 was only in the tax year 2016-2017, and he spoke to a colleague who confirmed that.

I wasn't convinced and decided to do some research, which led me here, and I can see that the £5000 starting savings rate is still a 'thing'

At this point, I'm not going to do anything else about it, as I don't earn enough to pay tax, even without the £5000.

But I'm not too impressed with the tax office for giving me incorrect information.

Dazed_and_confused

I suspect your tax code isn't actually wrong, just confusing.

It is normal for HMRC to include interest in your tax code if you have spare Personal Allowance.

If you didn't have any spare Personal Allowance and the interest was all due to be taxed at 0% (either the savings starter rate or savings nil rate (aka PSA)) then no deduction would be made.

If some of the interest was due to be taxed at 20% (or 40%) then a deduction would be needed.

So if your tax code is still greater than your expected pension for the whole tax year i.e. tax code 800L (£8009 tax free) and pension say £6,500, then you don't need to do anything as the code is correct.

Hard to believe HMRC staff are unaware the savings starter rate still exists , next thing is they'll be telling you you can have £1,000 "tax-free" interest!!!

Goldiegirl

Thank you Dazed and Confused, that explains it nicely.

I wished I'd just asked on here first, instead of phoning the tax office, as I always more sense from MSE !

Dazed_and_confused

And to avoid any confusion, you could have £1,000 interest taxed at 0%, it's just you don't have enough income to benefit from this yet.

Your (reduced) Personal Allowance comes first

Then the savings starter rate

And if that is used up (or non existent if other non savings income is high enough) then the savings nil rate (commonly known as the Personal Savings Allowance) can be used