Another Year and NS&I are still getting it wrong

polymaff

For years, NS&I have been issuing false account statements.  Under pressure they were stopped from describing these as the figures you could directly declare to HMRC, but they are still misleading savers as to the payments reported.

So, given that NS&I state that this statement covers 7/4/20 to 7/4/21,  where are the transactions they made on 8th April 2020 and why are they reporting transactions made on 8th April 2021.

Remarkable, ingrained, incompetence.

Thrugelmir

Statement covers period to the 7th April 2021. Interest will therefore be credited the day after , i.e. the 8th April 2021. .

Same principle will apply to April 2020. 

Never wise to endlessly throw boomerangs. They have a nasty habit of coming back to hit you on the head when you least expect them to. 

newatc

Tax is paid on payments not what has been accrued. If the OP is saying he is being taxed on interest received after April 5 then I think he is correct.
I had a long argument with HMRC about the State Pension which they taxed me on the accrual (what I would have been paid if I received the pension weekly) and not what I was actually paid before the tax year end. I won the argument eventually.

polymaff

Thrugelmir said:

Statement covers period to the 7th April 2021. Interest will therefore be credited the day after , i.e. the 8th April 2021. .

Same principle will apply to April 2020. 

Never wise to endlessly throw boomerangs. They have a nasty habit of coming back to hit you on the head when you least expect them to. 

You've got that entirely wrong.

polymaff

newatc said:

Tax is paid on payments not what has been accrued. If the OP is saying he is being taxed on interest received after April 5 then I think he is correct.
I had a long argument with HMRC about the State Pension which they taxed me on the accrual (what I would have been paid if I received the pension weekly) and not what I was actually paid before the tax year end. I won the argument eventually.

This is one of the crazy anomalies of the tax system.

If I'd known about it beforehand, I, too, would have got them to pay the pension weekly.

RG2015

polymaff said:

newatc said:

Tax is paid on payments not what has been accrued. If the OP is saying he is being taxed on interest received after April 5 then I think he is correct.
I had a long argument with HMRC about the State Pension which they taxed me on the accrual (what I would have been paid if I received the pension weekly) and not what I was actually paid before the tax year end. I won the argument eventually.

This is one of the crazy anomalies of the tax system.

If I'd known about it beforehand, I, too, would have got them to pay the pension weekly.

I am planning on drawing my state pension next year. How exactly might it benefit me to elect for it to be paid weekly?

colsten

newatc said:

I had a long argument with HMRC about the State Pension which they taxed me on the accrual (what I would have been paid if I received the pension weekly) and not what I was actually paid before the tax year end. I won the argument eventually.

What precisely is the issue, and how does it manifest itself in monetary terms?

underground99

RG2015 said:

polymaff said:

newatc said:

Tax is paid on payments not what has been accrued. If the OP is saying he is being taxed on interest received after April 5 then I think he is correct.
I had a long argument with HMRC about the State Pension which they taxed me on the accrual (what I would have been paid if I received the pension weekly) and not what I was actually paid before the tax year end. I won the argument eventually.

This is one of the crazy anomalies of the tax system.

If I'd known about it beforehand, I, too, would have got them to pay the pension weekly.

I am planning on drawing my state pension next year. How exactly might it benefit me to elect for it to be paid weekly?

from ITEPA 2003, s 578 (‘Taxable pension income’):

‘If section 577 applies, the taxable pension income for tax purposes is the full amount of pension, benefit or allowance accruing in that tax year irrespective of when it is actually paid.’

Section 577 basically says state pension is one of those types of pension that the above applies to. You're taxed on the entitlement to receive it even if you are only receiving it at the end of the month rather than week by week.

If you're taking rather than deferring your pension, you're entitled to your first payment at the end of the first full week after you reach State Pension age, or if you were deferring, at the end of the first full week from when you want it to start. It's common to just get it dumped into your bank every 4 weeks. But say you start taking it next summer 2022 and your last receipt for that year is middle of March 2023: it would end up that your taxable income (using up your personal allowance or attracting a tax charge) for the tax year 2022/23 includes two or three weeks worth of money that you didn't actually receive until middle of April 2023.  

Nobody really likes paying tax on cash that didn't get paid into their account until a later tax year, which is why it's nice that salary is taxed when received rather than day by day as it's earned.  So if it was possible to get it paid the pension weekly in arrears rather than monthly in arrears, without extra hassle, that would be of 'benefit' to you. The total amount you have earned wouldn't change, but you would have accelerated the payments. So rather than having (e.g.) 3x £180 that you owe tax on for 2022/23 but doesn't land until mid April 2023 along with 1x £180 for the next tax year, it would have been better to have got the first three payments in your bank account and then you could have used it for all sorts of stuff before the end of the tax year - e.g. stuffed it into an ISA, pension or VCT.  If you wanted to do those things but were still waiting for the money to be paid 4-weekly, you would need your own cash resources to bridge the gap.

newatc

underground99 said:

‘If section 577 applies, the taxable pension income for tax purposes is the full amount of pension, benefit or allowance accruing in that tax year irrespective of when it is actually paid.’

Section 577 basically says state pension is one of those types of pension that the above applies to. You're taxed on the entitlement to receive it even if you are only receiving it at the end of the month rather than week by week.

    That sounds very clear but nevertheless I presented the argument I stated to HMRC (with details of actual payments) and they accepted it and I got my rebate (which is about £20+ for each week payment is deferred). Additionally I saw one of these money problems in a money section of the Daily Telegraph (11/6/2016) where the reader was making the same point and when the DT took that to HMRC, HMRC conceded they were wrong and rebated their reader.

Thrugelmir

polymaff said:

Thrugelmir said:

Statement covers period to the 7th April 2021. Interest will therefore be credited the day after , i.e. the 8th April 2021. .

Same principle will apply to April 2020. 

Never wise to endlessly throw boomerangs. They have a nasty habit of coming back to hit you on the head when you least expect them to. 

You've got that entirely wrong.

When would expect the interest for the period ended the 7th April to be credited?  

polymaff

RG2015 said:

polymaff said:

newatc said:

Tax is paid on payments not what has been accrued. If the OP is saying he is being taxed on interest received after April 5 then I think he is correct.
I had a long argument with HMRC about the State Pension which they taxed me on the accrual (what I would have been paid if I received the pension weekly) and not what I was actually paid before the tax year end. I won the argument eventually.

This is one of the crazy anomalies of the tax system.

If I'd known about it beforehand, I, too, would have got them to pay the pension weekly.

I am planning on drawing my state pension next year. How exactly might it benefit me to elect for it to be paid weekly?

It just makes it easier to reconcile your and HMRC's understanding.  This is most relevant in your first (and, presumably, last) year of state pension.  The problem in reconciling is that HMRC and DWP refer you back and forth to each other.

Incidentally, in my first SP year HMRC prepopulated my SA with just a single week's SP payment - so about £115 instead a 4-figure sum.  The only prepopulated box - and they got it wrong by an order of magnitude.  (My birthday is in December!).