Personal Savings Allowance

1246

Comments

  • Atwill
    Atwill Posts: 21
    First Post
    Forumite
    To reiterate how I began these posts, I have been submitting R40s for each of the last 3 Tax years to reclaim tax £65 pa deducted from a CIC ( a UK Community Investment Company, where, by law, they must pay interest net of tax).

    I recently received a letter from HMRC to say that rather than getting refunds, I owe them several hundreds of pounds, of which they will send me calculations as to how that have arrived at that decision. I am awaiting those calculations.

    Meantime, my research led me to believe from the likes of MSE and many other reputable sources, that my income (part Company Pension as I'm retired, plus National Pension) would allow over £2000 savings interest (£2445 to be precise) before subject to tax. My savings interest is in fact less than half that amount. The correct amount of tax has, so far, been deducted from my Company Pension, but HMRC letter stated they have reviewed my tax status, and will be sending me their calculations in due course, setting out how I owe them back tax.

    My research led me to their own online calculator, which confirmed - as far as I can see - that their calculations for my circumstances are wrong (as per those examples I posted).

     There seem to be huge and widespread misunderstandings about how Starter Savings (£5k @ 0%, and PSA £1,000) operate, and so my research convinces me that, for me, and possibly many other savers on low incomes, if not already paying too much tax, they are about to be!

    Others reading this may be interested in a HM Treasury Document (PDF) I found online, which can't be attached here, but a link to its download is gov.uk/government/publications/finance-bill-2020-legislation-and-explanatory-notes where you can hyperlink to p10 Clause 4, confirming the implementation of said £5k Starter Savings Rate @ 0%.

    Any further comments on this matter welcomed!
  • RG2015
    RG2015 Posts: 5,755
    First Anniversary Name Dropper First Post Photogenic
    Forumite
    Have a look at the worked example on the attached link.

    https://www.gov.uk/apply-tax-free-interest-on-savings
  • Atwill
    Atwill Posts: 21
    First Post
    Forumite
    Sorry, no offence, have looked at dozens of examples but the only one that matters is mine, and my income, acording to MSE, Which, and their explanations (which all tally exactly) allow me over £2000 in interest at 0% tax.

    Surely the evidence of actual examples using HMRC calculator I've posted (which is official, not some baseless junk website) proves that their formula is flawed - if only for some situations.

    It should be 100% accurate for all situations as long as the correct data is input. But it's not.

  • RG2015
    RG2015 Posts: 5,755
    First Anniversary Name Dropper First Post Photogenic
    Forumite
    edited 11 July 2022 at 2:08PM
    Atwill said:
    Sorry, no offence, have looked at dozens of examples but the only one that matters is mine, and my income, acording to MSE, Which, and their explanations (which all tally exactly) allow me over £2000 in interest at 0% tax.

    Surely the evidence of actual examples using HMRC calculator I've posted (which is official, not some baseless junk website) proves that their formula is flawed - if only for some situations.

    It should be 100% accurate for all situations as long as the correct data is input. But it's not.

    Yes, it should be correct but it isn't.

    The warning that the site is not secure suggests that it is not currently supported. I am afraid that IT errors are all too frequent in many places..

    As regards you situation, you will only be taxed at 0% on £2,000 interest received, it your other income is £12,570 or lower.

    Edit. Apologies, I need to qualify this.

    If your income excluding interest is £16,570, you will be taxed at 0% on the £2,000 of interest income.

    If your income excluding interest is £17,570 you will be taxed at 0% on the first £1,000 of interest and 20% on the other £1,000 of interest.
  • Atwill
    Atwill Posts: 21
    First Post
    Forumite
    A not secure website doesn't mean it's not genuine, simply that it isn't https, as I have found many reputable and genuine websites to be just http. My browser has very tight restrictions and won't allow access to insecure websites. I'm just careful using whatever websites I use, as nothing in these days of deep fake can be trusted.

    As to your last paragraph, when I do receive HMRCs calculations in the post, I will bet my shirt on them being in line with what their online checker provides. What else do you think their overworked guys use - a hand calculator?
  • Atwill
    Atwill Posts: 21
    First Post
    Forumite
    A PS to the above, thanks for confirming what I have been trying so hard to get someone to do since starting this blog, that you are correctly applying the Starting Rate of £5k @ 0% and the PSA of £1,000 to your example (last para)
  • RG2015
    RG2015 Posts: 5,755
    First Anniversary Name Dropper First Post Photogenic
    Forumite
    edited 11 July 2022 at 2:31PM
    I have just done a simulated calculation on this calculator, and I can confirm that it is 100% incorrect.

    Salary, £32,570
    Interest, £1,000

    Tax paid, £20,000 @ 20% = £4,000

    Detailed calculation outcome

    I owe £200 in unpaid tax being £1,000 @ 20%.

    The calculator does not include the £1,000 personal savings allowance.

    I have separately confirmed that it does include the £5,000 starter rate for interest if the other figures allow this. 

    In conclusion, I have inferred that the online HMRC calculator is several years out of date.


  • Atwill
    Atwill Posts: 21
    First Post
    Forumite
    A PPS to the above. While HMRC's checker site remains "not secure" its Site Map links to HMG's secure site. Just thought I'd mention that to not dissuade others using the checker, for what it's worth.


  • RG2015
    RG2015 Posts: 5,755
    First Anniversary Name Dropper First Post Photogenic
    Forumite
    The best reason not to use the site is that it does not include the £1,000 Personal Savings Allowance in its calculations.
  • RG2015
    RG2015 Posts: 5,755
    First Anniversary Name Dropper First Post Photogenic
    Forumite
    edited 11 July 2022 at 3:20PM
    I am quite surprised to see that this calculator is still linked to a secure HMRC page.

    https://www.gov.uk/estimate-income-tax

    If you click on "estimate how much you should have paid in a previous year", then click on START NOW and you get to the calculator that is being discussed on this thread.

    I think @Atwill has identified a very useful issue here.

    Nevertheless, I cannot subscribe to the conclusion that HMRC are ripping us off.

    It is more case of being extremely careless in linking to an incorrect calculator page, that is over 6 years out of date. 
Meet your Ambassadors

Categories

  • All Categories
  • 341.8K Banking & Borrowing
  • 249.7K Reduce Debt & Boost Income
  • 449.2K Spending & Discounts
  • 233.9K Work, Benefits & Business
  • 606.1K Mortgages, Homes & Bills
  • 172.5K Life & Family
  • 246.8K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.8K Discuss & Feedback
  • 15.1K Coronavirus Support Boards