Pensions, interest and tax code; help wanted!

Kacc

squirrelpie said:

Just FWIW, I'm not registered for self-assessment and I get my state pension, another pension, and some bank interest. It's all taxed automatically by taking money from my other pension at what seems to be the right rate, and I don't have to do anything at all.

What happens if you are registered for self-assessment I do not know, and whether tax on interest is taken automatically for all banks etc I do not know. But for me it all just works.

Yes, I assumed that was the case, but there's a "hidden" rule that if you earn more than £10k in interest (excluding ISA interest) then a tax form is compulsory. 

That's added to my confusion, if I earned below £10k then I would expect them to take the interest tax I owe automatically from the following year and not have to fill in self-assessment. Is it different if I earn over £10k and do fill one in?

As I alluded to, what actually happens isn't clear. Frankly I think they will send me a new code and take my ineterst tax automatically, even before I complete my tax form. 

Think my worry is this is the first time it's been necessary and there isn't the info out there. I suppose the best thing to do is wait and see over Apr/May; then fill in my tax form in summer, send it off, and if any adjustments need to be made they will do so?

german_keeper

My mum has 2 x DB pensions, state pension, rental income and a small amount of taxable interest. HMRC send me a manual tax return for her around May/June time every year. Based on the historical info they hold, a couple of months before the new tax year starts they try and work out a tax code to collect the tax due in year from her main DB pension. The 25/26 coding letter goes like this:

Personal Allowance: £12,570
Less State Pension: £11,488
Less Property Income: £6,200
Less Untaxed Interest: £23
Less Adjustment for tax you owe(earlier year): £1,070
£6,211 to be added to your wages, salary or pension.

DB Pension 1: £6,211 is added to this income Tax code K620.
DB Pension 2: BR.

Just for clarity it doesn't number the DB schemes it names them. It's been a struggle for them the last couple of years because we have had some essential maintenance expenses on her house which were higher than rental income so spread over 2 years, hence the adjustment mentioned above. Hope this helps. 

Dazed_and_C0nfused

german_keeper said:

My mum has 2 x DB pensions, state pension, rental income and a small amount of taxable interest. HMRC send me a manual tax return for her around May/June time every year. Based on the historical info they hold, a couple of months before the new tax year starts they try and work out a tax code to collect the tax due in year from her main DB pension. The 25/26 coding letter goes like this:

Personal Allowance: £12,570
Less State Pension: £11,488
Less Property Income: £6,200
Less Untaxed Interest: £23
Less Adjustment for tax you owe(earlier year): £1,070
£6,211 to be added to your wages, salary or pension.

DB Pension 1: £6,211 is added to this income Tax code K620.
DB Pension 2: BR.

Just for clarity it doesn't number the DB schemes it names them. It's been a struggle for them the last couple of years because we have had some essential maintenance expenses on her house which were higher than rental income so spread over 2 years, hence the adjustment mentioned above. Hope this helps. 

She is very generous paying tax for the property income so far in advance of when she needs to pay it!

Kacc

Dazed_and_C0nfused said:

german_keeper said:

My mum has 2 x DB pensions, state pension, rental income and a small amount of taxable interest. HMRC send me a manual tax return for her around May/June time every year. Based on the historical info they hold, a couple of months before the new tax year starts they try and work out a tax code to collect the tax due in year from her main DB pension. The 25/26 coding letter goes like this:

Personal Allowance: £12,570
Less State Pension: £11,488
Less Property Income: £6,200
Less Untaxed Interest: £23
Less Adjustment for tax you owe(earlier year): £1,070
£6,211 to be added to your wages, salary or pension.

DB Pension 1: £6,211 is added to this income Tax code K620.
DB Pension 2: BR.

Just for clarity it doesn't number the DB schemes it names them. It's been a struggle for them the last couple of years because we have had some essential maintenance expenses on her house which were higher than rental income so spread over 2 years, hence the adjustment mentioned above. Hope this helps. 

She is very generous paying tax for the property income so far in advance of when she needs to pay it!

She's like me I suppose; technicllay the tax we owe isn't a "debt" until pay-by date; if I owe something I still want it paid ASAP and then I can forget about it, been like that all my life! Never paid for anything "in installments", just the way I was brought up, "if you haven't the money for it now, don't buy it" - Mum!!

Sarahspangles

Kacc said:

squirrelpie said:

Just FWIW, I'm not registered for self-assessment and I get my state pension, another pension, and some bank interest. It's all taxed automatically by taking money from my other pension at what seems to be the right rate, and I don't have to do anything at all.

What happens if you are registered for self-assessment I do not know, and whether tax on interest is taken automatically for all banks etc I do not know. But for me it all just works.

Yes, I assumed that was the case, but there's a "hidden" rule that if you earn more than £10k in interest (excluding ISA interest) then a tax form is compulsory. 

That's added to my confusion, if I earned below £10k then I would expect them to take the interest tax I owe automatically from the following year and not have to fill in self-assessment. Is it different if I earn over £10k and do fill one in?

As I alluded to, what actually happens isn't clear. Frankly I think they will send me a new code and take my ineterst tax automatically, even before I complete my tax form. 

Think my worry is this is the first time it's been necessary and there isn't the info out there. I suppose the best thing to do is wait and see over Apr/May; then fill in my tax form in summer, send it off, and if any adjustments need to be made they will do so?

There are limitations on the amount that can be taken through PAYE, I think it’s 50%. So someone with a small pension in payment and lots of untaxed interest may need to make a separate payment for some or all of it.

sheramber

Are you asking if they will include your interest amount in your code?
or

are you asking if they include the tax due for /4/25 in your code  for a later year, instead of you paying it direct?

Kacc

sheramber said:

Are you asking if they will include your interest amount in your code?
or

are you asking if they include the tax due for /4/25 in your code  for a later year, instead of you paying it direct?

I just want to know which they will do - and if I have a choice!

Dazed_and_C0nfused

Kacc said:

sheramber said:

Are you asking if they will include your interest amount in your code?
or

are you asking if they include the tax due for /4/25 in your code  for a later year, instead of you paying it direct?

I just want to know which they will do - and if I have a choice!

If your interest is over £10k just keep filing the return each year.

PAYE is only ever provisional anyway.

squirrelpie

On https://www.gov.uk/apply-tax-free-interest-on-savings the bit about registering for self assessment if interest is above £10,000 is under a heading of "If you're self-employed" but on the forum at https://community.hmrc.gov.uk/customerforums/pt/683a7777-5a47-ee11-a81c-6045bd0c0056 the HMRC people seem to be advising other people to do that as well? I'm confused.

Sarahspangles

squirrelpie said:

On https://www.gov.uk/apply-tax-free-interest-on-savings the bit about registering for self assessment if interest is above £10,000 is under a heading of "If you're self-employed" but on the forum at https://community.hmrc.gov.uk/customerforums/pt/683a7777-5a47-ee11-a81c-6045bd0c0056 the HMRC people seem to be advising other people to do that as well? I'm confused.

Interesting - I think that’s recently changed. We looked at it within the last three months because OH’s interest has breached this year. I’m sure it wasn’t split into self-employed and PAYE at that point. It’s not the sort of thing I’d miss.