Tax code change - "untaxed interest on savings and investments worth"

Lifes_Grand_Plan

Hi folks,

I had an e-mail from HMRC today saying my tax code had changed. I logged in to see the reason is:

"you now get Untaxed interest on savings and investments worth £XXX"

This year my salary was due to tip over into the 40% bracket by a about £1k, however i've recently started AVCs by salary sacrifice into my pension which will keep me under the 40% bracket.

I'm assuming that HMRC aren't that up to date on my income so are still assuming I'll go into the 40% bracket and therefore wouldn't get the £1000 tax free allowance on interest, so that's why they've now assumed I should be paying tax on the interest. Is that likely the case?

Presumably over the next few months, when they realised I won't tip into the 40% bracket, they'll make an adjustment to my code, or just pay a refund after year end?

They have added an X at the end of my code which apparently means "Your tax is based on your pay in each pay period, not the whole year. This stops you paying too much tax in one go. Your payslip or pension statement could show this as W1/M1, or week1/month 1." I presume this is because they can see its touch and go whether i'll hit 40% or not and so they'll review my tax more frequently over the next few months and adjust 'on the fly' to avoid taxing me wrongly?

TIA for any guidance on this.

ellie99

I'm not going to be any help to you, but just wanted to say that I had exactly the same wording on my change of tax code this week, and I'm nowhere near the 40% bracket, so it might not be that which has triggered your change.

I have savings and a small pension (around 2k pa) and my tax code has changed to S130LX. 
Their estimated forecast for tax to pay doesn't look right, I'm hoping it will be corrected when i complete my self assessment.

molerat

Does your on line tax account show the correct estimated taxable income for your employment ?  That is how HMRC come to their coding decisions.

Lifes_Grand_Plan

molerat said:

Does your on line tax account show the correct estimated taxable income for your employment ?  That is how HMRC come to their coding decisions.

It didn't quite. It showed as £50,338 e.g. just into the 40% bracket. I expect to be more like £50,064 so just under the 40% bracket. I've just submitted a new estimate to them so will see what difference that makes.

Sarahspangles

Have you kept track of your actual and forecast interest? If it will* go over £1000, or £500 if you’re a higher rate tax payer, then that will trigger the change.

* Or HMRC think it will based on looking at interest received last year, and this year to date)

Lifes_Grand_Plan

Sarahspangles said:

Have you kept track of your actual and forecast interest? If it will* go over £1000, or £500 if you’re a higher rate tax payer, then that will trigger the change.

* Or HMRC think it will based on looking at interest received last year, and this year to date)

Not exactly kept track, but I knew last year I was close to the £1000 with interest rates being so good, so I started moving it all into ISAs so this year should be nowhere near last years amounts, which also helps me, but I appreciate HMRC don't know that yet and only have last years to go on.