Personal Savings Allowance not deducted from income on self assessment

DuchessYumington

Why has my self assessment not applied my personal savings allowance, which I believe should be £1,000 as a basic rate tax payer, to my tax calculation? All the savings interest I have declared has been added to my income, with 0% deduction applied to the amount. My total earnings are approximately £26,000, with approximately £22,000 from property income. Thank you in advance for any advice.

eskbanker

If you share the detail of your tax calculation then that should help clarify - are you referring to that displayed at the end of your self-assessment?

DuchessYumington

Details from Tax Calculation:
Pay from all employments £3,657.00 Profit from UK land and property £22,832.00 Interest from UK banks, building societies and securities etc £122.00

 Total income received £26,611.00
 minus Personal Allowance £12,570.00
 Total income on which tax is due £14,041.00

Savings interest from banks or building societies, securities etc. Basic rate band at nil rate £122.00 x 0% £0.00

eskbanker

DuchessYumington said:

Details from Tax Calculation:
Pay from all employments £3,657.00 Profit from UK land and property £22,832.00 Interest from UK banks, building societies and securities etc £122.00

 Total income received £26,611.00
 minus Personal Allowance £12,570.00
 Total income on which tax is due £14,041.00

Savings interest from banks or building societies, securities etc. Basic rate band at nil rate £122.00 x 0% £0.00

So you earned £122 in interest and this is correspondingly taxed at 0%, which is exactly how it should be handled?

DuchessYumington

I read the 0% as 0% tax relief on that figure, not as 0% tax due on the figure. I very much appreciate your clarification, as I contacted HMRC this morning with this query and they were unable to clarify it to me. Thank you.

eskbanker

Presumably the income subject to non-zero tax will be £13,919?

Dazed_and_C0nfused

DuchessYumington said:

I read the 0% as 0% tax relief on that figure, not as 0% tax due on the figure. I very much appreciate your clarification, as I contacted HMRC this morning with this query and they were unable to clarify it to me. Thank you.

A sad state of affairs 😔.

There isn't actually a separate allowance available for savings interest.  The Personal Savings Allowance is actually a 0% tax rate, applicable to up to £1,000 of interest.

So as you have used all your Personal Allowance elsewhere the interest is all taxed.  Just at a 0% rate.

DuchessYumington

Thank you so much for your responses, I am very grateful for any help to understand the system better.

esk banker - Yes; Pay, pensions, profit etc. Basic rate £13,919.00 x 20% £2,783.80.
But why is this figure slightly less than the Total income on which tax is due at £14,041.00?

And if you have time to respond, I would love some clarification on this statement:
How we have worked out your income tax Your basic rate limit has been increased by £6,625.00 and £330.00 to £44,655.00 for pension payments and Gift Aid payments. This reduces the amount of income charged to higher rates of tax.

Dazed & Confused -
I find the terms / language used are very confusing. I'm a very small scale landlord trying to completing a self assessment accurately, and even with lots of time spent researching, it is not at all straightforward.

eskbanker

DuchessYumington said:

esk banker - Yes; Pay, pensions, profit etc. Basic rate £13,919.00 x 20% £2,783.80.
But why is this figure slightly less than the Total income on which tax is due at £14,041.00?

Because the £122 savings interest is taxable income but is taxed at 0%, rather than actually being tax-free as such.

The derivation of the increase to your basic rate limit isn't clear from the figures you've shared so far, but you've presumably made pension contributions and Gift Aid donations, which do both generate tax relief?

DuchessYumington

Because the £122 savings interest is taxable income but is taxed at 0%, rather than actually being tax-free as such. Thank you. And in practical terms, the result to my income tax is the same?

You've presumably made pension contributions and Gift Aid donations
Yes, I've made private pension contributions & gift aid donations. When I make the pension contributions, the pension provider claims the tax relief from the government at the 20% rate and adds it to the amount that I contribute monthly. So there is further tax relief at the self assessment stage?

eskbanker

DuchessYumington said:

Because the £122 savings interest is taxable income but is taxed at 0%, rather than actually being tax-free as such. Thank you. And in practical terms, the result to my income tax is the same?

Yes, for most people there's no meaningful difference but it can have an impact close to thresholds where the actual amount of taxable income can influence allowances.

DuchessYumington said:

You've presumably made pension contributions and Gift Aid donations
Yes, I've made private pension contributions & gift aid donations. When I make the pension contributions, the pension provider claims the tax relief from the government at the 20% rate and adds it to the amount that I contribute monthly. So there is further tax relief at the self assessment stage?

I think that adjustment is purely academic, in that you're not using all of your basic rate band anyway.