You may be paying tax on savings interest when you should not be.

aussie96

Just got off the phone from HMRC again about why I have been paying tax on a second pension when I am under the tax limit £12570 for 2 pensions so should get the full starter rate limit £5000 plus the £1000 on savings interest. Last tax year I had tax taken out because I was over the basic £1000 savings interest limit which I rang up and queried but still was deducted. I went online to check this tax years codes on both pensions and again there was a taxable amount for interest over the £1000. So rang HMRC to ask why when my personal limit before tax on savings should be £6000 total. I was told that the HMRC computer system has a glitch in the program that if you have more than 1 source of income it defaults to the basic £1000 Interest limit !!!! The lady was very helpful and had to put in a figure of £0 next to the interest column to make sure I did not get tax deducted again. I did mention that the glitch always seems to be in HMRC favour! I then asked if I would have to give them a ring at the start of every new tax year to stop the problem happening again and they confirmed that I would. I can only imagine how many people are paying tax on savings interest that should not be because in my experience most retired people will have at least 2 forms of income.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6665451/you-may-be-paying-tax-on-savings-interest-when-you-should-not-be

Are you quite sure about that?

What tax codes were in place and what do you expect to get from each pension?

eskbanker

Talk of glitches in programs sounds wide of the mark, but it's undoubtedly true that PAYE codings sometimes need a bit of iteration when new income streams start.

It's also true that 'spare' personal allowance is allocated to savings income if total PAYE income is below the £12,570, which does cause confusion for many, but once HMRC are aware of the correct annual amount of PAYE income then they should adjust tax codes accordingly. If their estimates for your current year income streams are inaccurate, you can correct them via your online tax account.

What are your estimates for your two pensions this year and what tax codes have been allocated to them?

aussie96

Tax codes on both pensions were what i earnt in a year. Both adding up to my takings of £12500. Then amount would be on my account of taxable income over the £1000 saving interest payment. The taxable amount of this was then taken out of my smaller pension over several months on last years tax year and on my new tax year the same was going to happen again

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/81974941#Comment_81974941

If you're saying that you earned £12500 from pensions and something between £1K and £6K in non-ISA savings interest (and no other income, no marriage allowance given or received, etc) then you shouldn't be paying tax at all, but if the codes add up to £12500 then I don't understand why anything's been deducted via PAYE?

aussie96

And there is the problem, I should not have been paying tax but I did last year which she said she could not see at the moment until she has all the info. I would have paid tax again this year because it had on my account the untaxed interest over the £1000 limit. I am only trying to explain what has happened to me and help people if they have the same problem. I changed my tax codes on line last tax year to my exact earnings to see if resolved the tax being taken out but it did not.

eskbanker

I am only trying to explain what has happened to me and help people if they have the same problem

Unfortunately, your explanation is difficult to follow, for me at least! It would be very helpful to see actual numbers if you're OK with sharing these…

aussie96

OK Tax code on 1st pension 1140L Tax code on 2nd pension 117T and then untaxed income on savings £187 when I received £1187 in interest. I have not earnt over those codes. The HMRC lady told me on the phone the system does not apply the £6000 limit because of the two sources of income instead of one and defaults to the £1000 limit.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81974992#Comment_81974992

So how much pension do you expect to receive this tax year for 1st pension and 2nd pension?

aussie96

so codes are same but still on system as £187 untaxed interest so that is why I rang up.As said previously she told me she had to manually put in the system £0 for the untaxed interest to make sure I was not taxed again.

eskbanker

What tax have you actually paid, and how?