Savings tax interest - confused!

annie1276

Hi all, I’ve had a letter from HMRC today letting me know I didn’t pay enough tax in the last financial year due to earning interest on savings. Happy to pay it but am struggling to understand their calculation and hoping someone here is more clever than me and can understand it! 

I am a higher rate tax payer, earned £1066 in interest and the amount of tax owed is £606 - which is more than 40% of the interest earned - and is there not also a £500 personal allowance on savings? Very confused but am I being daft and missing something obvious? All help much appreciated! 

zagfles

Does the letter not show the workings? Sounds like there's more than just tax on interest owed, could be your tax code was wrong, or you got work benefits which weren't taxed etc. 

annie1276

It does show the workings but they don’t make a lot of sense. The summary explanation given is unpaid tax on savings interest of £1066 and £606 owed. My tax code is definitely correct and I don’t get any work benefits. 

zagfles

You'll need to post the workings if you want help otherwise we're just guessing

kimwp

annie1276 said:

It does show the workings but they don’t make a lot of sense. The summary explanation given is unpaid tax on savings interest of £1066 and £606 owed. My tax code is definitely correct and I don’t get any work benefits. 

Would be easier if you posted them.

Dazed_and_C0nfused

annie1276 said:

It does show the workings but they don’t make a lot of sense. The summary explanation given is unpaid tax on savings interest of £1066 and £606 owed. My tax code is definitely correct and I don’t get any work benefits. 

Without that detail it's impossible for anyone to explain what has happened.

Your P60 details would also be useful (pay, tax deducted and tax code)

annie1276

Sorry everyone, will post workings now - I just wasn’t sure if there was a general principle I was missing that would explain this rather than something relating to me personally! 

annie1276

Hopefully this helps? The total taxable income at the top includes the savings interest earned and is minus normal personal allowance of 12,570.

Dazed_and_C0nfused

annie1276 said:

Hopefully this helps? The total taxable income at the top includes the savings interest earned and is minus normal personal allowance of 12,570.

That does clearly show the £500 of your income has been taxed at 0% (the Personal Savings Allowance).

If your interest was £1,066 in total then the tax due for that element is £226.40 (1066 - 500 = 566 x 40%)

The rest must be for some other reason

annie1276

Dazed_and_C0nfused said:

annie1276 said:

Hopefully this helps? The total taxable income at the top includes the savings interest earned and is minus normal personal allowance of 12,570.

That does clearly show the £500 of your income has been taxed at 0% (the Personal Savings Allowance).

If your interest was £1,066 in total then the tax due for that element is £226.40 (1066 - 500 = 566 x 40%)

The rest must be for some other reason

Thank you - I was hoping not to have to call them but I guess I will need to - wish me luck  

Dazed_and_C0nfused

annie1276 said:

Dazed_and_C0nfused said:

annie1276 said:

Hopefully this helps? The total taxable income at the top includes the savings interest earned and is minus normal personal allowance of 12,570.

That does clearly show the £500 of your income has been taxed at 0% (the Personal Savings Allowance).

If your interest was £1,066 in total then the tax due for that element is £226.40 (1066 - 500 = 566 x 40%)

The rest must be for some other reason

Thank you - I was hoping not to have to call them but I guess I will need to - wish me luck  

You could just work it out yourself (or with our help) though.  What is different in the calculation compared to what happened during the year and is on your P60.