Personal savings allowance and tax code

HappyBirthday

Hi there.

I am a basic rate taxpayer.

HMRC have issued me with a tax code for 20/21 of 1069L made up of 12500 (personal allowance) - 1805 (taxable interest).

I will probably receive about £1400 - £1600 in taxable interest for 20/21.

Does the tax code mean HMRC think I will receive £1805 in interest (a slight overestimate to make sure I don't underpay) or £2805 (a large and incorrect overestimate)?

How does tax coding and the personal savings allowance work? Is it included in the tax code or is it given after the tax year end in a repayment calculation?

If HMRC wanted to get my tax right without the need for a repayment, the correct tax code could be 12500 (personal allowance) + 1000 (personal savings allowance) - 1600 (bank interest) = 11900 = 1190L. As it stands I will have to make a considerable repayment claim at the end of 20/21. I would like to understand the HMRC process. Thanks.

schiff

Their estimate is £2805 and until you tell them that your estimate is £1600 it will stay that way.

[Deleted User]

And if your non savings income is below 17500, you may also need to offset your savings income with the 'starting rate for savings'- whatever balance may be left

HappyBirthday

[Deleted User] said:

And if your non savings income is below 17500, you may also need to offset your savings income with the 'starting rate for savings'- whatever balance may be left

"Hi there.

I am a basic rate taxpayer."

Wheres_My_Cashback

HMRC can and will use your previous interest earnt to estimate your annual interest until you tell them otherwise. Get yourself a Gateway login ID and you can see how they derive their figures and if you think they're wrong/are still including accounts that are no longer used then you can update some online there and then and others over the phone. You can also manually adjust your annual earnings if you think they have the wrong amount.

colsten

Wheres_My_Cashback said:

HMRC can and will use your previous interest earnt to estimate your annual interest until you tell them otherwise. Get yourself a Gateway login ID and you can see how they derive their figures and if you think they're wrong/are still including accounts that are no longer used then you can update some online there and then and others over the phone. You can also manually adjust your annual earnings if you think they have the wrong amount.

A gov.uk Verify login should be sufficient to access your Personal Tax Account. It's much faster to set up than a Gateway login ID, which might take even longer than normal to get at the moment.

RG2015

HappyBirthday said:

[Deleted User] said:

And if your non savings income is below 17500, you may also need to offset your savings income with the 'starting rate for savings'- whatever balance may be left

"Hi there.

I am a basic rate taxpayer."

The starting rate for savings is nothing to do with being a basic rate taxpayer. Please see the link below for more information.

https://www.gov.uk/apply-tax-free-interest-on-savings

LobsterMemory

I'm new to paying extra tax so please enlighten me if I'm mistaken:
I thought that now HMRC are getting savings figures from the banks etc the tax code reflects any tax you owe from the previous year rather than estimating this year's?

RG2015

LobsterMemory said:

I'm new to paying extra tax so please enlighten me if I'm mistaken:
I thought that now HMRC are getting savings figures from the banks etc the tax code reflects any tax you owe from the previous year rather than estimating this year's?

The banks etc last sent details to HMRC in August 2019 of my interest received in the tax year 2018/2019. HMRC used this figure as an estimate for 2019/2020 and now are using it for 2020/2021.

My actual interest for 2018/2019 is just under £1,000 so my tax code is not affected for any of these three tax years.

However when the figures were first submitted, HMRC made a mistake and double counted some interest pushing me above £1,000 and changed my 2019/20 tax code. The change was intended to reclaim tax for 2018/19 and charge me for the estimated interest for 2019/20.

I phoned them and gave them the correct figures and they corrected my tax code and my tax over payment was corrected in the following month's PAYE.

LobsterMemory

Thanks
So if I apply this to my own situation if I may
18/19 Nowhere near the threshold
19/20 Owe tax on £1300 interest. HMRC will discover this in August and change my tax Code shortly after
20/21 HMRC will use the £1300 savings estimate and it's up to me to change it. If I don't, would it be corrected automatically when they find the true figures in Aug 21?

LobsterMemory

EDIT above: think I mean 21/22 rather than 20/21