Personal Savings allowance

Anthear

I wondered if anyone else had discovered that if you hold savings in your Child's name, their interest counts towards your personal savings allowance??  This seems grossly unfair to me.  Has anyone else had their tax code adjusted to take savings income of more than the allowance of £1,000 in account?  

Dazed_and_C0nfused

Millions of people will have had their tax code adjusted for untaxed interest.

But the savings nil rate band (aka Personal Savings Allowance) only applies to those with at least £16,270 (often £17,270) in other taxable income.

What exactly are you concerned about?

Jeremy535897

When a parent gives money to their child, the income on that money remains taxable on the parent until the child reaches age 18. That has been the case for a very long time (not far off a hundred years).

Anthear

Not overly concerned, just the lack of explanation/transparency from HMRC - they don't send you a statement showing how they have calculated the figure, for example.

Jeremy535897 - not all the money my child was given to them by me, so how does HMRC tell who has given which portion of the money and therefore how to tax it???

Jeremy535897

They don't tell you how they calculated the figure, because you might then disclose something they weren't aware of.

You allocate the interest between the parental and other contributions on a pro-rata basis, but you would need evidence to show it didn't all come from the parent. (It is better to avoid mixed accounts like this.)

RG2015

Anthear said:

Not overly concerned, just the lack of explanation/transparency from HMRC - they don't send you a statement showing how they have calculated the figure, for example.

Jeremy535897 - not all the money my child was given to them by me, so how does HMRC tell who has given which portion of the money and therefore how to tax it???

If you ask HMRC, they will tell you how they calculated their figures.

Anthear

RG2015 said:

Anthear said:

Not overly concerned, just the lack of explanation/transparency from HMRC - they don't send you a statement showing how they have calculated the figure, for example.

Jeremy535897 - not all the money my child was given to them by me, so how does HMRC tell who has given which portion of the money and therefore how to tax it???

If you ask HMRC, they will tell you how they calculated their figures.

Yes, I know and I have asked them, but it's a pain in the **** to get through on the 'phone and they've only just started answering - they wouldn't take calls until recently.  However, they tell you how the amount above £1,000 is made up but not how the £1,000 is calculated.

Jeremy535897 - you first sentence makes no sense to me, surely it's in their interests to know about everything and surely it's down the HMRC and the savings providers to come up with a system that works??  Your second para suggests that everyone fills in a return - I don't and only found out about this when my tax code changed.

Can you paste me a link to the info about earning thresholds for paying the savings tax - you mention £16,270 and £17,270.  Thanks

Anthear

Jeremy535897 said:

They don't tell you how they calculated the figure, because you might then disclose something they weren't aware of.

You allocate the interest between the parental and other contributions on a pro-rata basis, but you would need evidence to show it didn't all come from the parent. (It is better to avoid mixed accounts like this.)

OK - I've found this:  https://www.gov.uk/apply-tax-free-interest-on-savings and the figure is £17,570.  In the 2019-20 tax year I didn't exceed that figure, but I did the 2020-21 tax year.  So am I correct in thinking that provided my earnings are under £17,570 then I have £5k of savings allowance not £1k?  Thanks

Jeremy535897

See https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-rates-apply-me#toc-how-does-the-starting-rate-for-savings-work-

Anthear

Jeremy535897 said:

See https://www.litrg.org.uk/tax-guides/tax-basics/what-tax-rates-apply-me#toc-how-does-the-starting-rate-for-savings-work-

Thank you - that's as clear as mud.  My poor brain can't process that amount of confusion tonight.  Why are these things made as wordy and complicated as possible?

Jeremy535897

Ask the government. They write the rules. In my experience, LITRG are normally clearer than anyone else when explaining these things. I doubt you will find a simpler explanation.