Personal savings allce

Daliah

I am appaled to hear that HMRC falsely take tax of people at the lower income end.

OP, if HMRC give you the run-around, perhaps Citizens Advice and/or Age Concern can help you get what is rightfully yours, i.e. your income and savings interest without any tax deduction? Also involve your MP so the issue is raised with the Treasury who can put a stop to this sharp practice.

msallen

Dazed_and_C0nfused said:

msallen said:

This is a different situation, but may have a similar root cause...

I've been living off savings for the last couple of years before hitting 55 this year and starting drawdown of my pension a few months ago. I initially set my drawdown to £1000 per month with the intention of setting a more appropriate amount (in order to drawdown exactly 12570 pa for the first few years, having also taken a small tax free lump sum too).

When I got round to setting the drawdown amount exactly I noticed that my tax code was not 1257 but rather 1164. I rang HMRC to query this and was told that they had a known bug in the system such that if your "PAYE income" was less than £12570 (which mine looked to be on course to be after the first two months), then your estimated taxable interest was automatically deducted from 12570 to produce your new tax code without any consideration of either the £5k or £1 allowances. The person I spoke to was able to correct this whilst I was on the phone, and indeed notification of the amended code came through a week or so later.

That isn't a bug that is how tax codes are intended to work.

You can only use the savings starter rate band and savings nil rate band once you have used all your Personal Allowance.

As, at the point your tax code was calculated, HMRC expected you to have unused Personal Allowances then some of the interest used these.

Which left tax code allowances equal to the amount of expected pension income.

Had you changed your expected pension income to say £12,570 then there would be no spare Personal Allowance and no tax code deduction (unless the interest was greater than £6,000).

Hopefully the HMRC adviser hasn't caused too much damage to your tax records by whatever they've done to manipulate things 🙈

It was the HMRC advisor who described it as a "known bug", and I cannot see any reason why my personal allowance should be reduced.

1164 did not represent the expected pension income. It was calculated as 12570 less expected interest income.

Using the 1164 code, if I had increased my drawdown without contacting HMRC about it my pension platform would have incorrectly deducted some tax at source. 

Albermarle

It sounds like HMRC need to rewrite some software !

xylophone

It sounds like HMRC need to rewrite some software !

See zagfles comment here

https://forums.moneysavingexpert.com/discussion/comment/79437721/#Comment_79437721

cricidmuslibale

In what I hope is an amusing aside, if you look at the title of this thread without properly focusing on it, it can be read as ‘Personal Savings Alice’. I don’t know about you but I think it would be absolutely wonderful to know a lady (or perhaps in the near future a female robot) called Alice who would be readily available to help with any personal savings issues that one might have! She/It could even be a rival to Martin Lewis himself if she's/it’s really really good at this!