Savings allce

Silverbird65

Why would HMRC include my hubby's untaxed interest in his tax code calculation. It is under the 1000 annual allce,?
Thanks

Dazed_and_C0nfused

Silverbird65 said:

Why would HMRC include my hubby's untaxed interest in his tax code calculation. It is under the 1000 annual allce,?
Thanks

Probably because he isn't able to use the savings nil rate band (aka Personal Savings Allowance).

You have to have used all of your Personal Allowance and any available savings starter rate band before the savings nil rate band can be used.

Perhaps you could clarify what the tax code is and roughly how much he expects to receive (in taxable pay/pension) from the company who is using that code.

Silverbird65

He is working till the end of June when he retires and goes on to state pension. He is receiving a small GMP from April 23 which is currently coded 105t  £1492 pa His employment is  till June £5120.101L code. Then remainder of yr on SPension full amount. Thanks

Dazed_and_C0nfused

Silverbird65 said:

He is working till the end of June when he retires and goes on to state pension. He is receiving a small GMP from April 23 which is currently coded 105t  £1492 pa His employment is  till June £5120.101L code. Then remainder of yr on SPension full amount. Thanks

That looks more like he can use the savings nil rate band but HMRC's estimate of his interest is more than £1,000.

Can you provide the breakdown of how the 101L has been calculated?

And what does his Personal Tax Account show his estimated earnings from the employment will be?

Silverbird65

The HMRC are showing interest £530 so not 1000. I am just getting the other figures.
Thanks

Silverbird65

Here are the figures

10510 tax free amount. 
Code pension 149T
Code emplom 1051L.
He is being taxed every week more and more.

Dazed_and_C0nfused

So either they have a very low earnings figure for the employment or a higher interest figure (in total) than you are expecting.

If you look closer there should be an estimated pay/earnings figure somewhere for the employment. That would be useful to know.

How much interest do you estimate he will get in total in 2023:24?

Silverbird65

His interest £700 . Earnings £5124 from April till end of June when he retires we gave them the figures yesterday. Thank you.

molerat

I assume that when he retires he will be commencing another pension so telling HMRC that the employment income was £5124 was the wrong thing to do as they now think he will be earning less than his tax allowance for the year assuming he will be receiving £5124 / 12 each month over the year so deducts any interest from that allowance which messes up the tax on income streams.  The best thing to do is keep the income from employment showing as the full year's earnings then when he retires the new pension will take over and you reduce the annual income from employment to the actual amount received.  You need to be smarter than the HMRC computer and know how to  play them at their own game.

sheramber

His state pension is taxable and is part of his total income for income tax purposes.

Slowplod

HMRC are doing exactly the same to my husband and myself, we have both taken early retirement and our company pensions are well below the tax threshold so haven't paid any tax for a few years. Our savings interest 2021-22 was around £450 each so well below the £1,000 allowable but this amount has been deducted from our personal allowance for last year and this year reducing our tax codes to 1213L. It doesn't affect me as I don't get the state pension for another 5 years but my husband is due to start getting the state pension from December this year so is going to pay more tax than he should. I've spoken to HMRC and sent a letter with the breakdown of all the savings interest but they still haven't altered the tax codes online so I'll have to try ringing again in a few weeks. I just wonder how many other people are on the wrong tax code due to the same error.