Tax code changed in Jan--- saving interest

SeeMe

It was 1185L until 1st jan (checked online in my gov uk account). A section now shows savings interest and the Tax code is smaller as the interest amount has been deducted, My income is a pension of just over £10,000 and saving interest and this total amount is smaller than my personal allowance.



Example 1185L with £400 interest, my tax code is now


1145L


Also looking at the code from april 6th, the same amount of interest has been deducted from 1250L to 1210L.
I am wondering why and who has sent the interest figure if banks do not any more, and should the new tax year start afresh without the previous years interest showing? and therefore reducing the tax code.
I have not paid any tax but just trying to understand how it works.

eskbanker

SeeMe wrote: »

I am wondering why and who has sent the interest figure if banks do not any more

The banks do provide interest data to HMRC, which has become more important (not less so) since the removal of taxation at source on savings interest in 2016.

SeeMe wrote: »

and should the new tax year start afresh without the previous years interest showing?

No, HMRC works on the (not unreasonable) basis that you'll earn similar interest from one year to the next and so carry forward the figure like that, effectively as a default assumption for use as a draft. It's not cast in stone and you can advise them to use a different figure if you feel that's justifiable....

This thread goes into more detail if you're still curious: https://forums.moneysavingexpert.com/discussion/5947607/interest-details-on-hmrc-personal-tax-account-updated-to-include-how-to-access-interest-details

colsten

Banks do send interest payment info to the HMRC. HMRC have just, for inexplicable reasons, chosen to not display the data. You can ring HMRC and insist they tell you what they are using. In my case, they sent me the information in a letter as I wanted it in writing.

You should be able to see how they calculated your tax code in your online Personal Tax Account. HMRC will assume that you get the same amount of interest in the new tax year as you got in the old. If you don't agree with that, a quick (?) call to them is all you need to do to update it.

eskbanker

^ Not often two posts are so similar, even right down to the bolding!

Dazed_and_confused

Reducing your tax code in that way is standard practice for HMRC when you have unused Personal Allowance.

If your income was larger and you were able to make use of the savings starter rate or savings nil rate of tax it would be different.

bowlhead99

eskbanker wrote: »

right down to the bolding!

Where do I sign up to get on this bandwagon ? Am I doing it right?



Sorry, long day

SeeMe

eskbanker wrote: »

The banks do provide interest data to HMRC, which has become more important (not less so) since the removal of taxation at source on savings interest in 2016.

No, HMRC works on the (not unreasonable) basis that you'll earn similar interest from one year to the next and so carry forward the figure like that, effectively as a default assumption for use as a draft. It's not cast in stone and you can advise them to use a different figure if you feel that's justifiable....

This thread goes into more detail if you're still curious: https://forums.moneysavingexpert.com/discussion/5947607/interest-details-on-hmrc-personal-tax-account-updated-to-include-how-to-access-interest-details

colsten wrote: »

Banks do send interest payment info to the HMRC. HMRC have just, for inexplicable reasons, chosen to not display the data. You can ring HMRC and insist they tell you what they are using. In my case, they sent me the information in a letter as I wanted it in writing.

You should be able to see how they calculated your tax code in your online Personal Tax Account. HMRC will assume that you get the same amount of interest in the new tax year as you got in the old. If you don't agree with that, a quick (?) call to them is all you need to do to update it.

Dazed_and_confused wrote: »

Reducing your tax code in that way is standard practice for HMRC when you have unused Personal Allowance.

If your income was larger and you were able to make use of the savings starter rate or savings nil rate of tax it would be different.

Ok thanks.
I have got the jist of it and i don't think i will be near last years interest (lower) so a phone call is coming.

Dazed_and_confused

If you did nothing (given the tax code hasn't changed anything) then HMRC will eventually review the 2018:19 tax year when they get the actual details from the banks and presumably you will owe nothing.

They will then update your 2019:20 tax code using the 2018:19 information as an estimate.

There is nothing you can (or need to) do about 2018:19 now but you could provide a more accurate estimate for 2019:20 if you wanted but it will make no difference to anything in real terms. Unless your interest is going to jump to more than £6k

info_maniac

SeeMe wrote: »

My income is a pension of just over £10,000 and saving interest and this total amount is smaller than my personal allowance.
Example 1185L with £400 interest, my tax code is now
1145L

I'm confused, if OP's total annual income is £10,000 (within the Basic personal allowance of £11,850) and his annual interest income is £400 (below the Personal Savings Allowance (PSA) of £1000)

Plus, as OP's annual income is below £16,850, he should be able to use £5000 of "starting rate of savings".

So, why is HMRC changing OP's tax code, if there is no tax liability?

Dazed_and_confused

Neither of the 0% tax rates are of any use to the op.

The op doesn't have enough income for the savings starter rate of tax to be used.

And the savings nil rate (aka PSA) comes after that so that isn't of any use to the op either.

The reason there is no tax payable on the savings interest for this person is that the income is covered by spare Personal Allowance. So the tax code is adjusted to reflect this.

TBC15

So if your income is at or below your PA you can still get interest of up to £6000 tax free?