Untaxed interest on savings and investments

236dave

Hi,
This enquiry is for my wife.
Her tax code has been changed to account for £1686 Untaxed interest on savings and investments.  Why such a large amount?
I've attached captions from my wifes tax account.
She earns <£4200 per year.
She withdrew £1000 (£750 taxable) from her SIPP just before the end of the last tax year. (1st and only withdrawal)
Her SIPP has less than £4000 in it.
She does have savings of which she earns around £800-1000 in interest per year.
Why the £1686 amount?  Can someone explain.
Many Thanks

Dazed_and_C0nfused

It will likely be the interest banks and building societies reported for the 2021-22 tax year.

The 2022-23 details have to be reported by end of June 2023.

As she has spare Personal Allowances they are used by the interest.

If her pension income used all her Personal Allowance the deduction would be less (or none existent if she had enough savings starter rate band available).

TheBanker

Remember they are collecting tax on £1,686 - not charging £1,686 of additional tax. 

Albermarle

TheBanker said:

Remember they are collecting tax on £1,686 - not charging £1,686 of additional tax. 

Plus due to her low income she is not actually paying tax anyway, so it is not really a big issue that the untaxed interest figure is bigger than the OP expected.

molerat

Several other posts here on the same subject.  If she uses less than her personal allowance then they will fill that gap with any untaxed interest.  She will not pay any tax unless that income estimate is low and she earns more than the £8939 allocated to the employment.  A quirk of the system that must waste a lot of call handler's time answering queries in a system that is already under pressure.

236dave

TheBanker said:

Remember they are collecting tax on £1,686 - not charging £1,686 of additional tax. 

Good point!

236dave

Albermarle said:

TheBanker said:

Remember they are collecting tax on £1,686 - not charging £1,686 of additional tax. 

Plus due to her low income she is not actually paying tax anyway, so it is not really a big issue that the untaxed interest figure is bigger than the OP expected.

Yes thats true, no tax is being paid.  We were just curious how they came to that amount.

236dave

molerat said:

Several other posts here on the same subject.  If she uses less than her personal allowance then they will fill that gap with any untaxed interest.  She will not pay any tax unless that income estimate is low and she earns more than the £8939 allocated to the employment.  A quirk of the system that must waste a lot of call handler's time answering queries in a system that is already under pressure.

All the replies I'm getting here are saving a call to HMRC.  I'd expect her income for this tax year to be under £5000.