2023-24 savings tax bill slightly more than own estimate

IceCreamCone10

2023-24 outstanding tax owed is on savings interest from that year. The taxable employment income and tax already paid on that employment income, were from the P60.

However the savings interest tax is exactly £2 more than my estimate which is to the exact penny. I did a 20% tax deduction from the gross savings interest (after PSA) but the actual tax bill is exactly £2 more.

Will just pay it but would this increase be to do with the quirks of their calculations? E.g. the £1.8 extra you can end up paying, although in this case it is exactly £2.

[Deleted User]

IceCreamCone10 said:

2023-24 outstanding tax owed is on savings interest from that year. The taxable employment income and tax already paid on that employment income, were from the P60.

However the savings interest tax is exactly £2 more than my estimate which is to the exact penny. I did a 20% tax deduction from the gross savings interest (after PSA) but the actual tax bill is exactly £2 more.

Will just pay it but would this increase be to do with the quirks of their calculations? E.g. the £1.8 extra you can end up paying, although in this case it is exactly £2.

Are you sure that it’s not as a result of PAYE rounding?
For example, with a tax code of 1257L you actually receive 12579 allowances as opposed to 12570. The difference of 9 at 20% is £1.80.

DRS1

But then he'd be paying less not more.  Wouldn't he?

SiliconChip

The only way you can be sure is to ring HMRC and ask them to give you a breakdown of the savings interest that has been reported to them which you can match against your own records to identify the discrepancy. I did it and found that one bank's interest had not been included in the HMRC total (I'm still trying to get to the bottom of why not).

RG2015

IceCreamCone10 said:

2023-24 outstanding tax owed is on savings interest from that year. The taxable employment income and tax already paid on that employment income, were from the P60.

However the savings interest tax is exactly £2 more than my estimate which is to the exact penny. I did a 20% tax deduction from the gross savings interest (after PSA) but the actual tax bill is exactly £2 more.

Will just pay it but would this increase be to do with the quirks of their calculations? E.g. the £1.8 extra you can end up paying, although in this case it is exactly £2.

Does your P800 show your savings interest tax? Mine only showed the untaxed savings interest.

I asked HMRC for a full breakdown of my untaxed savings interest and when it arrived in the post I saw that I had missed one account. If you want to pursue this you could ask them for a full breakdown.

I doubt that it is down to any quirks. If you pay tax at 20% then £10 of interest would be £2 of tax.

chrisbur

This will be due to PAYE being calculated slightly differently to the way HMRC calculate tax.
PAYE uses one tax allowance figure to cover ten possible tax allowances, so for example the allowance for 1257L covers all allowances from £12570 to £12579.  Everyone on 1257L gets the allowance for £12579.  These figures are based on the old ( but still used ) Table A which uses a figure for the full year but also needs to have a figure that divides exactly by 52 for a weekly figure and 12 for a monthly figure, and also fits in with the way Table A works out allowance for codes over 500.  For example 1257L get two allowance figures for 500 and one for 257.
That actually means that the annual tax allowance for 1257L for weekly paid is different to monthly paid so weekly actually get £12579.84 and monthly £12579.12
PAYE then deducts this allowance from your pay for the year to get a figure tax is paid on and tax is then deducted from the full pounds ignoring any pence.
HMRC does it a bit different they ignore the pence on your income and use your exact allowance.  
This results in a tax difference of about £1.80 to £2 For a 20% ( not Scottish ) tax payer; the figure for tax is always in 20p steps as only full pounds are taxed.
For example you are weekly paid have code 1257L ( for an allowance of £12570 )and £20000.04 earnings
PAYE £20000.04  less £12579.84 is £7420.20  Tax on £7420 is £1484
HMRC £20000  less £12570  is £7430  Tax on £7430 is £1486

chrisbur

RG2015 said:

IceCreamCone10 said:

2023-24 outstanding tax owed is on savings interest from that year. The taxable employment income and tax already paid on that employment income, were from the P60.

However the savings interest tax is exactly £2 more than my estimate which is to the exact penny. I did a 20% tax deduction from the gross savings interest (after PSA) but the actual tax bill is exactly £2 more.

Will just pay it but would this increase be to do with the quirks of their calculations? E.g. the £1.8 extra you can end up paying, although in this case it is exactly £2.

I doubt that it is down to any quirks. If you pay tax at 20% then £10 of interest would be £2 of tax.

When HMRC calculate the tax they do so for all taxable income added together so wages will be added to interest.  Tax on wages is  calculated by PAYE and that has lots of quirks.

[Deleted User]

DRS1 said:

But then he'd be paying less not more.  Wouldn't he?

No. 12579 ‘granted’ at PAYE using the tax tables - the resultant discrepancy is not normally collected. 

But if a calculation arises either through self-assessment or a P800 12570 is applied - hence the recouping of £9 @ 20%. 

Explained perfectly by chrisbur above. 

RG2015

chrisbur said:

RG2015 said:

IceCreamCone10 said:

2023-24 outstanding tax owed is on savings interest from that year. The taxable employment income and tax already paid on that employment income, were from the P60.

However the savings interest tax is exactly £2 more than my estimate which is to the exact penny. I did a 20% tax deduction from the gross savings interest (after PSA) but the actual tax bill is exactly £2 more.

Will just pay it but would this increase be to do with the quirks of their calculations? E.g. the £1.8 extra you can end up paying, although in this case it is exactly £2.

I doubt that it is down to any quirks. If you pay tax at 20% then £10 of interest would be £2 of tax.

When HMRC calculate the tax they do so for all taxable income added together so wages will be added to interest.  Tax on wages is  calculated by PAYE and that has lots of quirks.

Is it possible that a quirk could result in the OP being charged an extra £2 in tax on savings interest?

[Deleted User]

RG2015 said:

chrisbur said:

RG2015 said:

IceCreamCone10 said:

2023-24 outstanding tax owed is on savings interest from that year. The taxable employment income and tax already paid on that employment income, were from the P60.

However the savings interest tax is exactly £2 more than my estimate which is to the exact penny. I did a 20% tax deduction from the gross savings interest (after PSA) but the actual tax bill is exactly £2 more.

Will just pay it but would this increase be to do with the quirks of their calculations? E.g. the £1.8 extra you can end up paying, although in this case it is exactly £2.

I doubt that it is down to any quirks. If you pay tax at 20% then £10 of interest would be £2 of tax.

When HMRC calculate the tax they do so for all taxable income added together so wages will be added to interest.  Tax on wages is  calculated by PAYE and that has lots of quirks.

Is it possible that a quirk could result in the OP being charged an extra £2 in tax on savings interest?

The quirk is on PAYE. The underpayment of £2 would not be collected if no calculation necessary. 

If one is, to include other income, the £2 forms part of the total liability. 

I suppose that you could say the savings income has brought the £2 into collection. 

IceCreamCone10

Thanks all for your replies. Yes it seems to be the £1.80 - £2 hole then and also applicable to savings interest in this context.

For info, the untaxed savings interest was rounded down without the pence. It was the correct figure via BBSI and no savings tax amount was shown.

For the P800 calculations, P60 employment income also dropped the pence. After PA and PSA allowances and 20% tax, total tax was still in whole pounds. Minus P60 employment tax (with pence) so the difference was the savings tax bill also with pence.