Untaxed interest - PAYE and self assessment

Dazed_and_C0nfused

ArGee68 said:

This thread has gone off topic thanks to the nonsense postings from someone who has little understanding of the UK tax system.  

To answer OP's query, if there was an adjustment to your tax code for untaxed interest then then you will have paid tax on this amount within the tax deducted from your salary via the PAYE system.  For example, if you have salary of £20K and a "normal" tax code (1257L) you would have £1,486 PAYE deducted from your pay during the year.  However, if your code was adjusted for untaxed interest of £1,000 your tax code would be 1157L and therefore the PAYE deducted from your salary over the year would be £1,686.  £1,486 of this is tax on your salary and £200 being tax due on interest.

When you filed your tax return you will have included the gross salary and PAYE tax deducted figures from your P60 and these will be included within your final tax calculation.     Therefore you will have "credit" for the £200 you have paid on interest already through your tax code and any further under or overpayment will be the balancing figure. 

I hope that make sense.

Any adjustment to your tax code for untaxed interest should be after taking into account the £1000 personal savings allowance.  e.g.  I received untaxed interest of £1,069 in 2017/18 and my tax code for 2018/19 was adjusted for £69.  

Leaves little else to be said.

The final example could factor in £500 instead of £1,000 (or even £0 instead of £1,000) but it is a very accurate explanation.

Ferro

ArGee68 said:

This thread has gone off topic thanks to the nonsense postings from someone who has little understanding of the UK tax system.  

To answer OP's query, if there was an adjustment to your tax code for untaxed interest then then you will have paid tax on this amount within the tax deducted from your salary via the PAYE system.  For example, if you have salary of £20K and a "normal" tax code (1257L) you would have £1,486 PAYE deducted from your pay during the year.  However, if your code was adjusted for untaxed interest of £1,000 your tax code would be 1157L and therefore the PAYE deducted from your salary over the year would be £1,686.  £1,486 of this is tax on your salary and £200 being tax due on interest.

When you filed your tax return you will have included the gross salary and PAYE tax deducted figures from your P60 and these will be included within your final tax calculation.     Therefore you will have "credit" for the £200 you have paid on interest already through your tax code and any further under or overpayment will be the balancing figure. 

I hope that make sense.

Any adjustment to your tax code for untaxed interest should be after taking into account the £1000 personal savings allowance.  e.g.  I received untaxed interest of £1,069 in 2017/18 and my tax code for 2018/19 was adjusted for £69.  

Exactly this - I actually used £1010 in the very first reply to the op (which seems a long time ago now) but the point remains. 

ArGee68

Due to some of the nonsense posted on this thread, I didn't want to confuse matters further re: the different savings allowances as the OP had stated he had gone over £1,000 interest so I assumed he was a basic rate tax payer.  

Tax_Accountant - As it appears that English is not your first language, it is possible that we are misunderstanding some of what you are writing in your posts but generally most of what you have written is confusing and wrong.  Despite your user name, I doubt you have any qualifications or enough knowledge to be giving advice on UK tax matters and although you may want to help, you should refrain from doing so if you do not have the knowledge or expertise.  

I've been a qualified accountant for over 30 years.  I worked hard to earn that qualification and I personally don't appreciate someone posting inaccurate advice and information on a public forum that people may rely on.

sheramber

Tax_Accountant said:

ArGee68 said:

Due to some of the nonsense posted on this thread, I didn't want to confuse matters further re: the different savings allowances as the OP had stated he had gone over £1,000 interest so I assumed he was a basic rate tax payer.  

Tax_Accountant - As it appears that English is not your first language, it is possible that we are misunderstanding some of what you are writing in your posts but generally most of what you have written is confusing and wrong.  Despite your user name, I doubt you have any qualifications or enough knowledge to be giving advice on UK tax matters and although you may want to help, you should refrain from doing so if you do not have the knowledge or expertise.  

I've been a qualified accountant for over 30 years.  I worked hard to earn that qualification and I personally don't appreciate someone posting inaccurate advice and information on a public forum that people may rely on.

Well you would need to read the source I have shared and come back with your 30 years of experience.

Why your tax code might change

HMRC may update your tax code if:

• you start to get income from an additional job or pension

• your weekly State Pension amount changes

• your employer tells HMRC you have started or stopped getting benefits from your job

• you get taxable state benefits

• you claim Marriage Allowance

• you claim expenses that you get tax relief on

1 That refers to HMRC updating your code number during the year

2 That does not say your code number cannot include a dedcution for interest

3 I sugghttps://www.gov.uk/hmrc-internal-manuals/paye-manual/paye12060#IDA3L4MHest your read the HMRC  PAYE maual to  get teh correct information before advising others. Wromng information does not help

Examples of deductions and adjustments you can include in a tax code

• Untaxed interest (interest without tax taken off - gross interest). Note: The untaxed interest calculation has been enhanced, see below for further guidance
• Taxed investment income
• Income from property
• Foreign dividend (under £300 gross) in PAYE only cases (cases not linked to an SA record where no SA return is expected)
• Other income that does not arise from a trade, profession or vocation

..................

An example of the new untaxed interest calculation is shown below.

Example

• A customer advises that they are in receipt of untaxed interest of £5,600
• The customers PAYE Service record shows personal allowance £11,000 and estimated pay at the primary source as £13,256
• The PAYE Service calculates the untaxed interest coding deduction as 914L, calculated as

• PA 11000
• PA 13256 - PA 11000 = 2256 at Basic Rate
• SSR covers 2744 of interest up to 16000
• Then PSA 1000 applies to next 1000 of Untaxed Interest
• Untaxed interest 5600 - SSR 2744 and PSA 1000 =1856

• Therefore, the new primary source tax code will show

• PA 11000
• Less Untaxed interest 1856
• Leaves net coding allowance 9144
• Tax code = 914L