Confusion over personal savings allowance & starting rate

kimhelen

Hello

I have read Martins advice re the above and thought I understood it.  However, the tax office have reduced my tax code as I need to pay tax on my savings.   My pension is £10630.00 and I have earned £5550 in savings . P60 states tax code 1123/L.  I have tried constantly to get through to ask the tax office if this is correct.  A robot takes my details for over 5 minutes then decides they are too busy to take my call and cut me off!
 I am asking here just in case they can clarify and save my sanity.thought I could earn up to £18500 without tax? My total income is under this.

Dazed_and_C0nfused

And if your tax code is still 1123L and your pension £10,630 (or any amount not exceeding £11,239) you won't be paying any tax.

Or are you saying you are paying tax?

eskbanker

kimhelen said:

I have read Martins advice re the above and thought I understood it.  However, the tax office have reduced my tax code as I need to pay tax on my savings.   My pension is £10630.00 and I have earned £5550 in savings . P60 states tax code 1123/L.  I have tried constantly to get through to ask the tax office if this is correct.

You've fallen into the same trap that many others have, i.e. believing that your tax code is some sort of representation of how much income you can receive without paying tax, but it's not that at all - it's simply a mechanism via which PAYE deductions can be calibrated.  As pointed out about, if your code is 1123L and your pension income is £10,630, then no tax should be deducted by your pension provider, and you won't be due to pay any on your savings either, so there shouldn't be any issue or any need to talk to HMRC?

kimhelen

Thanks for the advice. I am actually paying tax as the tax deduction is showing on my Pension slip!
To me it looks as though they are disregarding the £5000 starting rate for savings. I am going to proceed the old fashioned way and write a letter.🙂

eskbanker

kimhelen said:

Thanks for the advice. I am actually paying tax as the tax deduction is showing on my Pension slip!
To me it looks as though they are disregarding the £5000 starting rate for savings. I am going to proceed the old fashioned way and write a letter.🙂

Your pension income is £10,630 with a tax code of 1123L but tax is being deducted?  Has this been happening all the way through the tax year, or has something changed, either the income or the tax code?

kimhelen

Hello eskbanker

Your question made me think about this further. The tax code is being reduced each time my pension provider increases my pension. For example I have just received a payment advise for January 2024 ( they send advice slips only when there are changes) showing a pension each month £945.81 , a tax code of 1090L/0 and income tax deduction of £7.20. All very confusing. 

Dazed_and_C0nfused

I suspect all you need to do is go onto your Personal Tax Account and provide HMRC with an upto date pension figure for this tax year and next i.e. the amount you expect to see on your P60.

You will know that far more accurately than HMRC can estimate it.

xylophone

See

https://forums.moneysavingexpert.com/discussion/comment/80510722/#Comment_80510722