Scared of exceeding PSA

Richard1212

I pay very large amounts of tax on savings----it is inevitable with very large savings. It doesn't bother me at all.

callum9999

jaypers said:

I don’t understand this fear. If you breach the PSA, you are better off than if you don’t because you are earning more. Simple as that. 

It's mainly greed - they don't want the government wasting their money by running schools or hospitals.

Thankfully I don't hear it very much any more so hopefully it has died out, but I used to hear a depressing number of people turning down promotions etc. because it would "put them in the next tax bracket", and they couldn't comprehend that only the tiny bit of their salary above the line gets the higher rate of tax, not the entire thing. 

MDMD

callum9999 said:

jaypers said:

I don’t understand this fear. If you breach the PSA, you are better off than if you don’t because you are earning more. Simple as that. 

It's mainly greed - they don't want the government wasting their money by running schools or hospitals.

Thankfully I don't hear it very much any more so hopefully it has died out, but I used to hear a depressing number of people turning down promotions etc. because it would "put them in the next tax bracket", and they couldn't comprehend that only the tiny bit of their salary above the line gets the higher rate of tax, not the entire thing. 

Not necessarily. In some edge cases (e.g. if you are about to go into higher rate) £1 of extra income can come with a bill of £200.

You lose £500 of PSA at 0% and it gets taxed at 40%

Descrabled

HMRC have been in the habit of not revising my tax code until January. So my company pension changes for only Feb to Apr using a fixed tax deduction. The following tax year's tax is based upon the interest earned 2 tax year earlier.

The problem really arises when the interest that arises reduces by a large amount. Then I will be hit twice, once by receiving less interest, and secondly by being taxed too much on my pension.

So the real problem will be when I drop from receiving above the PSA to below the PSA again.

Bigwheels1111

MDMD said:

callum9999 said:

jaypers said:

I don’t understand this fear. If you breach the PSA, you are better off than if you don’t because you are earning more. Simple as that. 

It's mainly greed - they don't want the government wasting their money by running schools or hospitals.

Thankfully I don't hear it very much any more so hopefully it has died out, but I used to hear a depressing number of people turning down promotions etc. because it would "put them in the next tax bracket", and they couldn't comprehend that only the tiny bit of their salary above the line gets the higher rate of tax, not the entire thing. 

Not necessarily. In some edge cases (e.g. if you are about to go into higher rate) £1 of extra income can come with a bill of £200.

You lose £500 of PSA at 0% and it gets taxed at 40%

What about taking the rise and upping pension payments to negate the rise.
Win, win.

I’ve just worked out that if benefits and pensions rise by 8.5% this year and the minimum 2.5% for the next 2 years I will have to pay tax on my savings.
Am I happy no. 
Three years ago I was getting almost nothing in interest on my savings, now I will need to file a self assessment 
in 2024 onwards.
Due to the base rate rises.

Dazed_and_C0nfused

MDMD said:

callum9999 said:

jaypers said:

I don’t understand this fear. If you breach the PSA, you are better off than if you don’t because you are earning more. Simple as that. 

It's mainly greed - they don't want the government wasting their money by running schools or hospitals.

Thankfully I don't hear it very much any more so hopefully it has died out, but I used to hear a depressing number of people turning down promotions etc. because it would "put them in the next tax bracket", and they couldn't comprehend that only the tiny bit of their salary above the line gets the higher rate of tax, not the entire thing. 

Not necessarily. In some edge cases (e.g. if you are about to go into higher rate) £1 of extra income can come with a bill of £200.

You lose £500 of PSA at 0% and it gets taxed at 40%

And some could lose their £252 Marriage Allowance tax credit as well.

Some nasty cliff edges if you're not careful!

Hurri

callum9999 said:

jaypers said:

I don’t understand this fear. If you breach the PSA, you are better off than if you don’t because you are earning more. Simple as that. 

It's mainly greed - they don't want the government wasting their money by running schools or hospitals.

Thankfully I don't hear it very much any more so hopefully it has died out, but I used to hear a depressing number of people turning down promotions etc. because it would "put them in the next tax bracket", and they couldn't comprehend that only the tiny bit of their salary above the line gets the higher rate of tax, not the entire thing. 

For me it's more about money saving. I want to get as close to my £500 PSA as possible but if I go above, any extra interest is eroded by the tax and I'm getting a lower rate of return on the excess. For example, after I've hit £500 interest, 6% savings at 40% is in effect 3.6% net. I can beat that in an ISA. So for me I want to maximise my return as much as possible, if that's greed, isnt that why we're all here?

Dazed_and_C0nfused

Hurri said:

callum9999 said:

jaypers said:

I don’t understand this fear. If you breach the PSA, you are better off than if you don’t because you are earning more. Simple as that. 

It's mainly greed - they don't want the government wasting their money by running schools or hospitals.

Thankfully I don't hear it very much any more so hopefully it has died out, but I used to hear a depressing number of people turning down promotions etc. because it would "put them in the next tax bracket", and they couldn't comprehend that only the tiny bit of their salary above the line gets the higher rate of tax, not the entire thing. 

For me it's more about money saving. I want to get as close to my £500 PSA as possible but if I go above, any extra interest is eroded by the tax and I'm getting a lower rate of return. For example, after I've hit £500 interest, 6% savings at 40% is in effect 3.6% net. I can beat that in an ISA. So for me I want to maximise my return as much as possible, if that's greed, isnt that why we're all here?

That's a perfectly logical reason.  Some are less so.

Qyburn

Thumbs_Up said:

My savings interest alone for 2023/24 will likely take me past £18,750* personnel tax allowance, I was hoping to keep under this, but for my sins I have accepted a temporary job over the Christmas period so I’m expecting to pay tax on savings interest and payed income combined for the first time in 3 years.

If you earn over £12,570 you enter another cliff edge scenario. Every additional £1,000 you earn will be taxed at 20%, and will also mean an extra £1,000 of interest will also be taxed.

£400 increase in tax from a £1,000 increase in earnings. Posters on here insist this is not a 40% marginal rate, but it sure looks like it, and has the same impact.

Thumbs_Up

Bigwheels1111 said:

MDMD said:

callum9999 said:

jaypers said:

I don’t understand this fear. If you breach the PSA, you are better off than if you don’t because you are earning more. Simple as that. 

It's mainly greed - they don't want the government wasting their money by running schools or hospitals.

Thankfully I don't hear it very much any more so hopefully it has died out, but I used to hear a depressing number of people turning down promotions etc. because it would "put them in the next tax bracket", and they couldn't comprehend that only the tiny bit of their salary above the line gets the higher rate of tax, not the entire thing. 

Not necessarily. In some edge cases (e.g. if you are about to go into higher rate) £1 of extra income can come with a bill of £200.

You lose £500 of PSA at 0% and it gets taxed at 40%

Three years ago I was getting almost nothing in interest on my savings, now I will need to file a self assessment 
in 2024 onwards.
Due to the base rate rises.

I have already sent off a self assessment for 2022/23 for the first time because my savings interest crept over the £10,000 threshold and I mean it did creep over by £80, but them’s the rules.

And at the end of the form it asked “would you like to add anything else” In the blank box I Stated “ I will very likely buy a house next year (inferring that I won’t have all that lovely interest money for next year)  but am patiently waiting for “my house is worth” to be expunged from the British national psyche.