Tax code change

sheramber

If you do not pay. any tax on your wages then you are not paying tax on your interest.

HMRC show the untaxed interest in the code number but as no tax is deducted none is paid. 

That is the way it is done by HMRC. 

Islandgirl11

I have had an email from HMRC saying that I owe tax because of the level of interest on my savings. They have already started to claw it back by changing my tax code. I am disputing how much interest they say I have received and was merely asking on the forum if HMRC would supply a detailed breakdown. I used to do the wages for small company so I know how tax codes work, but thank you for your input. 

molerat

If your income is below your tax code you will pay no tax, as simple as that.  HMRC will supply a breakdown of the actual interest reported to them for 2024-25.  They have not said you owe them any tax but have estimated you will receive £x in interest this year - did you earn anything close to that amount of interest last year - forget about the first £1000 tax free, simply that amount of interest ?  If you don't agree with that amount you can go into your on line tax account and change it or you can edit your income source to use up all the £12570 allowance and the tax code will change.  Read this thread https://forums.moneysavingexpert.com/discussion/6647470/paying-income-tax-when-taking-money-out-of-drawdown-pension/p3

Islandgirl11

molerat said:

Islandgirl11 said:

I don't wish to reveal those figures, the query is nothing to do with my earnings, it's a query regarding being taxed on savings interest.

If you do not earn in excess of the new tax code then you are not going to be taxed on that savings interest.  If you have spare allowance then HMRC will allocate some of your interest towards it.  If you earn  £10K with £1K interest and a 1257 code you will pay no tax, if you have a 1157 code because £1K of interest ha been allocated against your allowance you will still pay no tax.  

My full allowance is already used on my income. HMRC have clearly stated that I have earned a large amount of interest, over and above the £1k interest allowance, and have said I need to pay tax on it which they have started to do this month. I am disputing the amount of interest they say I have earned and just need to get a breakdown of it from them.

molerat

molerat said:

Do you earn in excess of the new tax code amount ?

Islandgirl11 said:

No, nowhere near. That's why I'm querying it.

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Islandgirl11

molerat said:

molerat said:

Do you earn in excess of the new tax code amount ?

Islandgirl11 said:

No, nowhere near. That's why I'm querying it.

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Apologies, I think responses and replies are getting mixed up (I'm a newbie).
Basically, my calculations seem to show that the K code which is allocated to me is taking far more tax from me than I actually owe. It has already been said that they often work on interest estimates which is why I want to see a breakdown of the interest they say I owe. My 1275L allowance is fully used up on my current income.

Dazed_and_C0nfused

Islandgirl11 said:

molerat said:

molerat said:

Do you earn in excess of the new tax code amount ?

Islandgirl11 said:

No, nowhere near. That's why I'm querying it.

????????????????????????

Apologies, I think responses and replies are getting mixed up (I'm a newbie).
Basically, my calculations seem to show that the K code which is allocated to me is taking far more tax from me than I actually owe. It has already been said that they often work on interest estimates which is why I want to see a breakdown of the interest they say I owe. My 1275L allowance is fully used up on my current income.

Yes they will supply a breakdown of you ask for one.

Your current tax code is likely to use the actual information from 2024/25 as an estimate for 2025/26.

So if HMRC have you down as earning say £2,500 in interest in 2024/25 and you are expected to be a basic rate payer in 2025/26 your tax code would include untaxed interest of £1,500 (as the first £1,000 is taxed at 0%).

Islandgirl11

Dazed_and_C0nfused said:

Islandgirl11 said:

molerat said:

molerat said:

Do you earn in excess of the new tax code amount ?

Islandgirl11 said:

No, nowhere near. That's why I'm querying it.

????????????????????????

Apologies, I think responses and replies are getting mixed up (I'm a newbie).
Basically, my calculations seem to show that the K code which is allocated to me is taking far more tax from me than I actually owe. It has already been said that they often work on interest estimates which is why I want to see a breakdown of the interest they say I owe. My 1275L allowance is fully used up on my current income.

Yes they will supply a breakdown of you ask for one.

Your current tax code is likely to use the actual information from 2024/25 as an estimate for 2025/26.

So if HMRC have you down as earning say £2,500 in interest in 2024/25 and you are expected to be a basic rate payer in 2025/26 your tax code would include untaxed interest of £1,500 (as the first £1,000 is taxed at 0%).

This is exactly it, I have worked out what my interest should be for 2024/25 and they are hugely over what it actually is. I will call them tomorrow for a breakdown and hopefully agree a figure with them that it actually is. Thank you for your help.

eskbanker

Islandgirl11 said:

I have worked out what my interest should be for 2024/25 and they are hugely over what it actually is. I will call them tomorrow for a breakdown and hopefully agree a figure with them that it actually is.

Just to be clear, have they provided you with a calculation for 2024/25 (which will contain what they believe to be actual figures, based on submissions from banks and building societies), or just a coding update for the rest of 2025/26 (which will use estimates based on last year's actuals)?  You should get the former before the latter, although it doesn't always work out that way....

Islandgirl11

eskbanker said:

Islandgirl11 said:

I have worked out what my interest should be for 2024/25 and they are hugely over what it actually is. I will call them tomorrow for a breakdown and hopefully agree a figure with them that it actually is.

Just to be clear, have they provided you with a calculation for 2024/25 (which will contain what they believe to be actual figures, based on submissions from banks and building societies), or just a coding update for the rest of 2025/26 (which will use estimates based on last year's actuals)?  You should get the former before the latter, although it doesn't always work out that way....

They have provided me a calculation for 24/25, just a figure with no breakdown and a coding update (K) for the rest of 25/26. I have all the figures for 24/25 and their calculation is way over mine.