Calculating tax on savings interest

kidwell25

Sorry to be dim, but what is the "it" you're referring to when you say "before you submit it"?

ColdIron

kidwell25 said:

Sorry to be dim, but what is the "it" you're referring to when you say "before you submit it"?

The self assessment

EthicsGradient

Dazed_and_C0nfused said:

Better outcome is possible with a different allocation of the Personal Allowance.

Earnings £42,836 - PA £5,136 = £37,700

£37,700 x 20% (basic rate) = £7,540

Interest £7,748 - PA £7,434 = £314
£314 x 0% (savings nil rate within higher rate band) = £0.00

Total tax payable = £7,540.00

NB. You would retain eligibility for Marriage Allowance in this situation.

I think I can put the calculation in your format, but get the final figure that I did. I think the point is that the full £500 is the nil rate band ought to apply somewhere, but in your calculation only £314 of it was used.

So the best way to apply the Personal Allowance would be:

Earnings £42,836 - PA £5,322 = £37,514

£37,514 x 20% (basic rate) = £7,502.80

Interest £7,748 - PA £7,248 = £500
£500 x 0% (savings nil rate within higher rate band) = £0.00

Total tax payable = £7,502.80

Dazed_and_C0nfused

Looking at my payslips, I apparently paid £6404 tax in 23-24. I think that's more than the 20% on my earnings because my tax code changed in November so as to recoup unpaid tax on interest from 22-23. 

 I think that is quite unlikely.

Any extra tax due for 2022-23 is usually included in your 2024-25 tax code.

The adjustment to your 2023-24 is much more likely to be an attempt to collect more tax for 2023-24, using the latest interest information (from 2022-23) as a provisional figure.  End result is your P60 would show more tax was deducted and be used in your 2023-24 tax calculation.