Untaxed interest on savings affecting tax code

Lynsey89

Hi,

I’m not very savvy when it comes to tax so I’m confused by my new tax code.
My code is 961N
Background- I was on maternity leave last year so only earned £6000 April to April.
This year I’ve started back on a new role/salary, I earn £8400 a year.
Checking my tax code on the government website pulls up some deductions which is marriage allowance and then ‘untaxed interest on savings and investments’
I Have never seen this before and don’t understand what it means.
The amount deducted is £1776.
I phoned HMRC but couldn’t understand what they were telling me.

Can anyone tell me why this has been deducted? I thought we got an allowance of tax free savings.
I have worked out my interest for last year and it’s roughly around £1045.

I just need it explained to me simply.
Thanks 

Dazed_and_C0nfused

There is no allowance for savings interest.

Your tax code has been reduced as you have spare Personal Allowance to use against your interest.

After those allowances have been used you would be taxed at the savings starter rate (upto £5,000 taxed at 0%) and then if you had a lot more interest another £1,000 would be taxed at the savings nil rate (also 0%).

If you expect to earn £8,400 and your tax code is 961N then you won't pay any tax on your earnings.

You would have to be earning £9620 before any tax would be deducted.

There is no need for you to do anything.  But if your earnings change and might go over £9619 then you need to inform HMRC and they will revise your tax code to take this into account.

Lynsey89

@Dazed_and_C0nfused
Thanks for explaining it.
Last pay month I worked overtime and had tax deducted from that month, would this be something I would get back at the end of the tax year if I’m within my allowance? 

Also if I do go over £9619 what would HMRC do to my tax code? 

Thank you

[Deleted User]

You would get the tax back through the tax year so long as your income for the whole year falls below your personal allowances. 

On the second point, note what Dazed stated in the final paragraph.

Dazed_and_C0nfused

Lynsey89 said:

@Dazed_and_C0nfused
Thanks for explaining it.
Last pay month I worked overtime and had tax deducted from that month, would this be something I would get back at the end of the tax year if I’m within my allowance? 

Also if I do go over £9619 what would HMRC do to my tax code? 

Thank you

If your expect to earn more than £9619 (not your salary but the taxable pay figure which gets shown on your P60) then just update your estimated earnings on gov.uk and HMRC recalculate your code and, because you would not have as many unused allowances they would reduce the interest entry in your tax code.

For example if you estimate your pay will £10,200 you would probably end up with a tax code of 1020N.