Effect of tax free redundancy pay and rent a room income on HMRC personal tax allowances

BPL

Hi,
I realise these are "tax free" at up to £30k and up to £7k5. Does any income received from these sources have to be added to your other income on your tax form.
I discovered this issue with savings income which was tax free as under £1000 but then realised HMRC add it to your income to assess your personal allownces tax ban thus pushing me into a higher band (40%).....and then having only £500 tax free interest. I know this is basic but a search revealed not a lot online. Here's hoping someone can help.

Jeremy535897

These are exemptions, so do not get taken into account in working out what your marginal tax rate is.

BPL

Are both amounts exempt and savings a special case?

Jeremy535897

Savings aren't exempt, they just have special rates of tax, including 0%, depending on circumstances.

BPL

Yes i thought that and tax return calculation confirms it. I was wondering about redundancy pay and rent a room income.

Jeremy535897

BPL said:

Yes i thought that and tax return calculation confirms it. I was wondering about redundancy pay and rent a room income.

Yes, and as I have said, they are exempt from tax, like many benefits, lottery winnings etc.

dctrgre

Redundancy payments may need to be reported on your tax return- box 9 on page 2 of the Additional Information pages (SA101). See the SA101 notes for more information. 

dctrgre

Rent a room income should also be disclosed on the property pages; as long as the income is less than £7500 (£3750 if let jointly) you just need to tick box 4 of the property pages.

Jeremy535897

dctrgre said:

Redundancy payments may need to be reported on your tax return- box 9 on page 2 of the Additional Information pages (SA101). See the SA101 notes for more information. 

dctrgre said:

Rent a room income should also be disclosed on the property pages; as long as the income is less than £7500 (£3750 if let jointly) you just need to tick box 4 of the property pages.

I think OP was just using these as examples, rather than asking how to report them.

BPL

Thanks for all the information including how to report them on the tax form. Having my marginal tax rates breached due to a possible £37500 additional income was a bit scary so I am glad I now understand it. I wish HMRC would allow you to pre-populate your self assessment to test these scenarios without having to bother experts like yourselves. Maybe there is a software product I could use ideally free....

uknick

BPL said:

Thanks for all the information including how to report them on the tax form. Having my marginal tax rates breached due to a possible £37500 additional income was a bit scary so I am glad I now understand it. I wish HMRC would allow you to pre-populate your self assessment to test these scenarios without having to bother experts like yourselves. Maybe there is a software product I could use ideally free....

If you're talking about the online tax return, I thought you could.  In the past I've entered figures, looked at the calculation to see the effect and then taken them back out again.