Tax on savings interest

Sahara20

i thought if you have no income employment you could earn tax on savings interest plus starter rate. HMRC have applied a 20% tax on moderate savings interest a few thousand (well under last year's tax code). And reduced my tax code. No other income. Surely this isn't right? They won't change it and say it is based on employment several years ago and future projections.

Isthisforreal99

So if you don't have a source of income against which a tax code could be operated then what is the issue - you won't pay any tax.

nottsphil

 Only HMRC can 'earn tax on savings interest '

Do you perhaps have a pension where you are under PAYE, which wouldn't be what you call 'income employment'?

badmemory

This is just HMRCs rather novel way of dealing with someone in your situation. As already said, if you have no income that is taxable at source then they can't tax you. Absolutely nothing to worry about.

molerat

With no PAYE income and a tax code of 1257 how much tax will you pay ?

With no PAYE income and a tax code of, say, 1000 how much tax will you pay ?

The answer to both is £0

All interest is taxable, there is no "tax free" amount, but some is taxable at 0%. You must use up your normal tax allowance before you can use any of the 0% bands so interest is set against any unused allowance. If you do have a PAYE income and the HMRC estimate of that is incorrect then that could lead to paying the incorrect amount of tax but none of that needs any contact with HMRC, it can all be rectified through your on line tax account.

Sahara20

if I sold a property and had substantially increased savings interest i would be taxed at a higher amount than if I had the standard 1257 allowance?

GrubbyGirl_2

Do you have any other income apart from interest on savings? If not employment maybe a pension or are you self employed?

Sahara20

no pension or other income. They say they are basing it on projections which they say they can't change.

Bigwheels1111

https://forums.moneysavingexpert.com/discussion/comment/82021536#Comment_82021536

In simple terms, if you have no income at all. Pension or benefits etc.

Up to £18,570 of interest is tax free per year split into 3 sections.

£12,570 Personal allowance

£ 5,000 Starter savings rate

£ 1,000 Personal saving allowance, The total is £18,570.

I have used this for the last 5 years.

HMRC, agents don't always understand this. So are not much help at times.

If interest is over 10k you will need to self assess, very simple and easy to do.

GrubbyGirl_2

Then as others have said your tax code is irrelevant as there is no income to tax. At the end of the financial year they will see you have had no income so that will inform next years projections

Isthisforreal99

https://forums.moneysavingexpert.com/discussion/comment/82021536#Comment_82021536

No, you are totally misunderstanding.