Savings and Tax Threshold.

Josquin

Hi,

I would be grateful for any thoughts on the following

I have a pension and some savings -not ISA.  I am on the full tax threshold tax code,  £12500.

My annual pension and savings interest income  do not exceed the threshold.

However HMRC have just reduced my threshold by £400 and changed the tax code.

What am i missing here? Is it due to having a lump sum that is creating the interest paid?

Thank you for any thoughts.

Albermarle

Have you checked on you online personal tax account? 
Or have you received a new tax code by post?
Either way you should see a breakdown of how the tax code is calculated.

vacheron

If you are a basic rate taxpayer, they must think you owe around £80 for something. 

This is often a benefit in kind, but if you do not work it shouldn't be that.

Do you have a government gateway account or the HMRC app? If so, you can log in and see the assumptions and calculations HMRC have made. 

Josquin

Thank you for your  replies.

Will ask HMRC to show me the calculations.

Dazed_and_C0nfused

Josquin said:

Hi,

I would be grateful for any thoughts on the following

I have a pension and some savings -not ISA.  I am on the full tax threshold tax code,  £12500.

My annual pension and savings interest income  do not exceed the threshold.

However HMRC have just reduced my threshold by £400 and changed the tax code.

What am i missing here? Is it due to having a lump sum that is creating the interest paid?

Thank you for any thoughts.

What was the £400 described as?

If you have spare tax code allowances then interest will use those.  But shouldn't mean you pay tax as a result of that happening.

eskbanker

Josquin said:

My annual pension and savings interest income  do not exceed the threshold.

However HMRC have just reduced my threshold by £400 and changed the tax code.

What am i missing here?

You're missing the fact that, unless the coding has been reduced to a level where it'll actually result in PAYE deductions from your pension payments, you won't be paying any tax, and therefore it doesn't matter what level it's been set to.  Tax codes are quite a blunt instrument and are used specifically to drive PAYE deductions rather than to represent how much income you can receive without paying tax, which is a relatively subtle distinction for many....

Josquin

Thanks everyone, great replies.

I am retired so not in work.

Maybe a good idea to re-inform them of that.

Josquin

'What was the £400 described as?

Savings interest.

eskbanker

Josquin said:

I am retired so not in work.

Maybe a good idea to re-inform them of that.

They'll already be aware of the sources of your taxable income, so that's unnecessary.

Dazed_and_C0nfused

Josquin said:

'What was the £400 described as?

Savings interest.

In that case its probably because you have spare allowances that the interest is using.

What is the new tax code and how much do you expect your next P60 to show your pension income is for 2025/26?

Josquin

' In that case its probably because you have spare allowances that the interest is using.'

Yes, that sounds about right,  thinking about it.

I will write (or phone) to check.

Thank you.