Savings tax question

eric4395

If I earn £50,000 per year and approx £8000 is taxed at 40% all worked out by paye by my employer.
If I then have £25,000 in savings at 2% over a tax period year this amounts to approx £500 in interest. How much tax should I pay on that £500,is it 40% of the £500 or am I entitled to earn the £500, then get taxed on anything above that.?

eskbanker

You'll have a personal savings allowance of £500, so the first £500 of savings interest is taxed at 0% (it's strictly a nil-rate band rather than an allowance as such), but if your interest goes above £500 then you'd be taxed (on the excess above £500) at your marginal rate, so 40%.

xylophone

Download the savings and dividends tax fact sheet here


https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-rates-apply-me

eric4395

I received a charge notice quoting £837 for 2017/18 untaxed interest then it took the £500 psa off and taxed me on that figure saying I owed them £140. However based on the information I gave above I would need to have more than £25000 in savings which I don't have.. Its less than that. It doesn't say how the figure of £837 has come about other than from figures from my bank or building society accounts. Should they provide me with more actual detail of how that figure has been provided. Signed up online to my personnel account but that doesn't tell you anymore than the letter I received. Also tried to phone up but gave up on hold.

Reed_Richards

It's not a mystery, you get bank statements which tell you exactly how much interest you earned. If you have registered for paperless banking you may need to look online. Every year I have to complete a Self Assessment tax return and I rely on such statements.

xylophone

Also tried to phone up but gave up on hold.

See https://forums.moneysavingexpert.com/discussion/5980156/hmrc-long-phone-waiting-times-big-phone-bills

Dazed_and_confused

I would need to have more than £25000 in savings which I don't have.

That isn't really true. You could have had some money in regular savers paying 5% or maybe P2P lending which can bring in double figures on occasion. Albeit with the risk of loss of capital.

Irrespective of that though you should be able to get HMRC to provide you will a list of institutions and what interest they reported as being paid to you.

There is another thread on this subject where instances of ISA interest being reported as taxable interest in error by banks was discussed.

Maybe you are caught up in that problem?

Or maybe you have just forgotten some accounts? You could have an account pay interest and be closed near the start of the 2017:18 tax year and that is nearly two calendar years ago now. So easily forgotten from that long ago