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TERRIBLE TIME WITH HMRC. DOUBLED MY INTEREST ON SAVINGS

2

Comments

  • kuratowski
    kuratowski Posts: 1,415 Forumite
    Sixth Anniversary 1,000 Posts Name Dropper Photogenic
    Non-cumulative codes are sometimes also called "month 1" or "week 1" codes because the effect is the same as if the payment was made during period 1 (April).  This means any sort of lump sum or bonus is almost inevitably going to be overtaxed with a non-cumulative code.   But it can happen with cumulative codes too - there was a post on here a couple of weeks ago, where someone received a bonus in April, and due to the way that PAYE works, they overpaid tax, and the correction of that overpayment via PAYE was going to happen bit by bit every month until November!  And of course there are many similar threads arising from pension lump sums.
  • HansOndabush
    HansOndabush Posts: 470 Forumite
    100 Posts Name Dropper Photogenic
    edited 3 June 2021 am30 8:06AM
    We also have HMRC issues over untaxed interest. As I understand it everyone has a £1,000 tax-free allowance against untaxed interest. Why then do HMRC keep deducting 'untaxed interest' of a few hundred pounds from my wife's tax code notification meaning she doesn't get her full personal allowance even though she has never been anywhere near earning £1,000 of interest in any tax year? This seems to happen every tax year and takes a lot of faff to sort out.
    We have raised this with HMRC and was supposed to have a reply within 3 weeks but that deadline came and went about a fortnight ago and there seems to be no progress on it.
    There is no "allowance" for interest.  There are two 0% tax bands though for interest.

    I suspect you are concerning yourself about something which is actually correct and has no impact on your wife.

    If her earnings/pension income is less than her Personal Allowance then the rest of her unused Personal Allowance will be used up by the interest, hence the tax code deduction.  Perfectly normal and correct in most instances.

    She can only make use of the £1,000 savings nil rate band (aka Personal Savings Allowance) if her total taxable income exceeds a minimum of £16,310 (often £17,570).

    What is her tax code and how much do you expect her to get paid in the current tax year by the employer/pension company who are using the tax code?  The taxable pay figure which will be shown on her P60.
    No, no she is taking an amount from her SIPP to make maximum use of her tax-free personal allowance and should pay no tax. But because, in her notice of coding, HMRC are deducting several hundred pounds of 'untaxed interest', she ends up being charged tax where none should be payable. The interest should not be taxable as it is well within the £1000 allowance and should not be reducing her personal tax allowance meaning she is paying tax.
    I do not at all see why you say "the rest of her unused Personal Allowance will be used up by the interest, hence the tax code deduction.  Perfectly normal and correct in most instances."
    Why is that normal at all? She should be paying no tax and I dont see why her personal allowance is being affected by untaxed interest which should not be taxed anyway?


  • zagfles
    zagfles Posts: 21,280 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Chutzpah Haggler
    We also have HMRC issues over untaxed interest. As I understand it everyone has a £1,000 tax-free allowance against untaxed interest. Why then do HMRC keep deducting 'untaxed interest' of a few hundred pounds from my wife's tax code notification meaning she doesn't get her full personal allowance even though she has never been anywhere near earning £1,000 of interest in any tax year? This seems to happen every tax year and takes a lot of faff to sort out.
    We have raised this with HMRC and was supposed to have a reply within 3 weeks but that deadline came and went about a fortnight ago and there seems to be no progress on it.
    There is no "allowance" for interest.  There are two 0% tax bands though for interest.

    I suspect you are concerning yourself about something which is actually correct and has no impact on your wife.

    If her earnings/pension income is less than her Personal Allowance then the rest of her unused Personal Allowance will be used up by the interest, hence the tax code deduction.  Perfectly normal and correct in most instances.

    She can only make use of the £1,000 savings nil rate band (aka Personal Savings Allowance) if her total taxable income exceeds a minimum of £16,310 (often £17,570).

    What is her tax code and how much do you expect her to get paid in the current tax year by the employer/pension company who are using the tax code?  The taxable pay figure which will be shown on her P60.
    No, no she is taking an amount from her SIPP to make maximum use of her tax-free personal allowance and should pay no tax. But because, in her notice of coding, HMRC are deducting several hundred pounds of 'untaxed interest', she ends up being charged tax where none should be payable. The interest should not be taxable as it is well within the £1000 allowance and should not be reducing her personal tax allowance meaning she is paying tax.
    I do not at all see why you say "the rest of her unused Personal Allowance will be used up by the interest, hence the tax code deduction.  Perfectly normal and correct in most instances."
    Why is that normal at all? She should be paying no tax and I dont see why her personal allowance is being affected by untaxed interest which should not be taxed anyway?

    It's normal, but obviously not correct. Technically, if your total income is within the personal allowance then the interest will be covered by the personal allowance not the PSA or savings nil rate band. But so what - the point of a tax code is to deduct the correct amount of tax, not to reflect how much personal allowance is available. For instance HMRC will increase your tax code if you get a marriage allowance transfer, your PA hasn't increased. HMRC will increase your tax code if you pay higher rate tax and contribute to a SIPP. Your PA hasn't increased. The tax code is adjusted to collect the correct amount of tax, it does not reflect how much PA you have available.
    So it is obviously utterly pointless to deduct untaxed interest from the tax code of people expected to earn below the PA. It achieves absolutely nothing and can cause hundreds to be incorrectly deducted as in my previous thread.  
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 16,290 Forumite
    10,000 Posts Fifth Anniversary Name Dropper
    edited 3 June 2021 am30 9:24AM
    We also have HMRC issues over untaxed interest. As I understand it everyone has a £1,000 tax-free allowance against untaxed interest. Why then do HMRC keep deducting 'untaxed interest' of a few hundred pounds from my wife's tax code notification meaning she doesn't get her full personal allowance even though she has never been anywhere near earning £1,000 of interest in any tax year? This seems to happen every tax year and takes a lot of faff to sort out.
    We have raised this with HMRC and was supposed to have a reply within 3 weeks but that deadline came and went about a fortnight ago and there seems to be no progress on it.
    There is no "allowance" for interest.  There are two 0% tax bands though for interest.

    I suspect you are concerning yourself about something which is actually correct and has no impact on your wife.

    If her earnings/pension income is less than her Personal Allowance then the rest of her unused Personal Allowance will be used up by the interest, hence the tax code deduction.  Perfectly normal and correct in most instances.

    She can only make use of the £1,000 savings nil rate band (aka Personal Savings Allowance) if her total taxable income exceeds a minimum of £16,310 (often £17,570).

    What is her tax code and how much do you expect her to get paid in the current tax year by the employer/pension company who are using the tax code?  The taxable pay figure which will be shown on her P60.
    No, no she is taking an amount from her SIPP to make maximum use of her tax-free personal allowance and should pay no tax. But because, in her notice of coding, HMRC are deducting several hundred pounds of 'untaxed interest', she ends up being charged tax where none should be payable. The interest should not be taxable as it is well within the £1000 allowance and should not be reducing her personal tax allowance meaning she is paying tax.
    I do not at all see why you say "the rest of her unused Personal Allowance will be used up by the interest, hence the tax code deduction.  Perfectly normal and correct in most instances."
    Why is that normal at all? She should be paying no tax and I dont see why her personal allowance is being affected by untaxed interest which should not be taxed anyway?


    All she needs to do is update her estimated income from the SIPP on her Personal Tax Account and a new tax code will be calculated removing the interest deduction.

    Unfortunately with modern pensions where people can take money as and when they want it is tricky for HMRC to accurately estimate her future pension income.

    If they think it will be £12,570 then no coding deduction (for interest) would be required.

    And I'm still not convinced she is actually in a position to be able to utilise the savings nil rate band (aka Personal Savings Allowance).  I think it is much more likely that her interest will be taxed under the savings starter rate band (also 0%).
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    I just felt 3 hours today and 4 hours the other day writing to the HMRC was such an effort and waste of time.

    It's now possible to update the figures online through ones own personal tax account. 
  • HansOndabush
    HansOndabush Posts: 470 Forumite
    100 Posts Name Dropper Photogenic
    edited 3 June 2021 am30 9:55AM
    We also have HMRC issues over untaxed interest. As I understand it everyone has a £1,000 tax-free allowance against untaxed interest. Why then do HMRC keep deducting 'untaxed interest' of a few hundred pounds from my wife's tax code notification meaning she doesn't get her full personal allowance even though she has never been anywhere near earning £1,000 of interest in any tax year? This seems to happen every tax year and takes a lot of faff to sort out.
    We have raised this with HMRC and was supposed to have a reply within 3 weeks but that deadline came and went about a fortnight ago and there seems to be no progress on it.
    There is no "allowance" for interest.  There are two 0% tax bands though for interest.

    I suspect you are concerning yourself about something which is actually correct and has no impact on your wife.

    If her earnings/pension income is less than her Personal Allowance then the rest of her unused Personal Allowance will be used up by the interest, hence the tax code deduction.  Perfectly normal and correct in most instances.

    She can only make use of the £1,000 savings nil rate band (aka Personal Savings Allowance) if her total taxable income exceeds a minimum of £16,310 (often £17,570).

    What is her tax code and how much do you expect her to get paid in the current tax year by the employer/pension company who are using the tax code?  The taxable pay figure which will be shown on her P60.
    No, no she is taking an amount from her SIPP to make maximum use of her tax-free personal allowance and should pay no tax. But because, in her notice of coding, HMRC are deducting several hundred pounds of 'untaxed interest', she ends up being charged tax where none should be payable. The interest should not be taxable as it is well within the £1000 allowance and should not be reducing her personal tax allowance meaning she is paying tax.
    I do not at all see why you say "the rest of her unused Personal Allowance will be used up by the interest, hence the tax code deduction.  Perfectly normal and correct in most instances."
    Why is that normal at all? She should be paying no tax and I dont see why her personal allowance is being affected by untaxed interest which should not be taxed anyway?


    All she needs to do is update her estimated income from the SIPP on her Personal Tax Account and a new tax code will be calculated removing the interest deduction.

    Unfortunately with modern pensions where people can take money as and when they want it is tricky for HMRC to accurately estimate her future pension income.

    If they think it will be £12,570 then no coding deduction (for interest) would be required.

    And I'm still not convinced she is actually in a position to be able to utilise the savings nil rate band (aka Personal Savings Allowance).  I think it is much more likely that her interest will be taxed under the savings starter rate band (also 0%).
    Well we didn't know about the online Personal Tax Account thing; but in any case HMRC know exactly what her income is because the pension company have informed them of the SIPP withdrawal and we can see the amount in the tax coding along with the deduction for untaxed interest that I don't think should be there as it is causing a tax charge. We have applied for a refund of tax which was taken from the pension withdrawal using the online form P55 but nothing much happening with it by checking progress online. We have also claimed the £1000 tax-free allowance on the interest that she has been denied; no progress on that either.

  • colsten
    colsten Posts: 17,597 Forumite
    10,000 Posts Seventh Anniversary Photogenic Name Dropper
    I just felt 3 hours today and 4 hours the other day writing to the HMRC was such an effort and waste of time.

    It's now possible to update the figures online through ones own personal tax account. 
    Well that’s what I thought, too, would be all that’s needed. I have done it myself, more than once. HMRC ask no questions about such adjustment requests; they simply issue a new tax code. 

    Mind you, I do my annual SA, so there’s an annual reconciliation between the expected and the actual taxable income (which flactuates as my savings interest and some other income flactuate). HMRC might take a different view for people not doing SA. 
  • RG2015
    RG2015 Posts: 6,007 Forumite
    Ninth Anniversary 1,000 Posts Name Dropper Photogenic
    I just felt 3 hours today and 4 hours the other day writing to the HMRC was such an effort and waste of time.

    It's now possible to update the figures online through ones own personal tax account. 
    Is this a recently updated option as it was previously possible, but was removed in early 2020?

    If it has been updated, do you have a link or set of links to follow in the HMRC PTA online?
  • RG2015 said:
    I just felt 3 hours today and 4 hours the other day writing to the HMRC was such an effort and waste of time.

    It's now possible to update the figures online through ones own personal tax account. 
    Is this a recently updated option as it was previously possible, but was removed in early 2020?

    If it has been updated, do you have a link or set of links to follow in the HMRC PTA online?
    I think this is referring to the ability to amend your estimated earnings or pension income, not the interest.
  • Ciprico
    Ciprico Posts: 619 Forumite
    Part of the Furniture 100 Posts Name Dropper
    They got my interest wrong, they essentially added the figure I provided on SA to the figure the banks gave them (so the amount was essentially doubled), and then continued the fiasco by assuming this was the figure to use for subsequent years.
    When I finally got them on the phone they accepted the figures I gave them with out questioning them, and changed the amounts going back several years there and then...
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