When do I pay the tax on my savings

Ocelot

InvesterJones said:

Adjusting your tax code won't affect you being in the higher tax bracket or not.

I still don't understand this concept.

Dazed_and_C0nfused

Ocelot said:

InvesterJones said:

Adjusting your tax code won't affect you being in the higher tax bracket or not.

I still don't understand this concept.

I suspect you are getting confused between what happens during the year, to try and collect the correct tax, and the actual calculation of your tax liability once the tax year has ended.

Simple example.  Welsh resident earning £50,270 in 2024-25 with no other taxable income.  They owe £500 in tax from a previous tax year and that is included in their 2024-25 tax code.  The tax code is C1132L (PA 12,570 less underpayment deduction 1,250 = tax code allowances 11,320).

The employer pays them £50,270 and uses code C1132L.  Using the HMRC tax tables the tax deducted is £8,036.40 (£37,700 x 20% + £1,241 x 40%).

Nothing changes during the year, no new income or allowances and HMRC calculate the liability for 2024-25 as follows,

Earnings £50,270
Less PA £12,570
Income to be taxed = £37,700
Tax due is £37,700 x 20% = £7,540
Plus tax owed from prior year £500
Total liability £8,040.
Less tax deducted £8,036.40
Tax underpaid £3.60 (this is usually ignored)

They are not a higher rate payer in 2024-25.