Baffled by tax

Green_garnet · 11 February 2019 at 11:38PM

I am baffled by my tax account for 2018-2019 and thank you for any help. I managed to sign up to a Personal Tax Account and hoped to send a message on line. I could not find a link once I signed in and wonder if any experienced people might be able to help, please. It is mostly about tax on annual interest, paid gross, of about £389 - not from my ISA which is separate and I do not pay tax on it.

The on line account says my Tax Code is S269L for 2018-2019.

I have a small personal annual pension of £288 paid as £19.12 per month as tax at 'BR' is deducted at source.

I have a works annual pension of £5357 and I think this is where the Tax Code S269L is applied - I pay about £42.54 every month for tax deducted from the monthly payment of this annual pension so receive about £403.89 every month.

I have a state pension of £9156 paid gross at £177.42 every week.

The Personal Tax Account on line also says I have interest of £389 - which may be taxable. This is from last year and the amount sounds about right. I thought this would not count because it was under the special £1000 allowance. (My annual total is £288, £5357, £9156 and gross interest of £389.)

The account says my estimated tax for 2018-2019 is £569. The only tax I pay (PAYE I think) is taken from my small personal pension and from my works pension.

I am struggling to understand if the amount I am paying is right and if it includes tax on the annual gross interest of £389.

I find it baffling because I thought I had the normal tax free personal allowance of £11850 and tax free interest of up to £1000 - which I would be below with my interest. I have personal pension of £288 yearly, works pension of £5357 annually and state pension of £9156 annually. Also interest (which I think is about right from last year) of about £389.

I hoped to ask on line if the £389 was included and taxed or if it was 'tax free' as under £1000.

I could not work it out properly myself as I kept getting different amounts I thought I would pay tax on, to add up to the 'estimate' the Personal Tax Account on line says, tax free £2690.

If the amounts are right I'll be pleased with it but I just could not work it out properly. Thank you very much for any help.

Green garnet

Dazed_and_confused · 12 February 2019 at 7:37AM

The £389 will be taxable.

It is not "tax-free" like an ISA.

There is no £1,000 "special allowance". There is a (upto) £1,000 tax rate for interest, the savings nil rate (0%), aka Personal Savings Allowance.

But you cannot benefit from that because, based on your post, you simply do not have sufficient income.

Your interest would be liable on the savings starter rate of tax. This is a different tax rate, for upto £5,000 of interest. The rate is also currently 0%.

The £2690 is your Personal Allowance less the (untaxed at source) State Pension. The interest doesn't need to be deducted because it is going to be taxed at 0%.

Green_garnet · 12 February 2019 at 2:19PM

Thank you very much for your reply, Dazed and Confused.

My total income (apart from the £389 interest) for 2018-2019 is £14801.

I thought my calculations would be wrong but I imagined £14801 less the tax free allowance of £11850 would mean my total tax 'bill' for 2018-2019 would be 20% of £2951 = £590.20. This would be about £21.20 more than the estimate the on line personal tax account which says £569.

I was probably doing it all wrong and getting into a muddle because I have not been understanding the proper names for different 'allowances' etc.

I budget quite carefully and did not want to owe any tax unexpectedly - e.g. maybe £21 or so.

Thank you again for taking time to reply.

Green garnet

polymaff · 12 February 2019 at 2:43PM

Until the end of Tax Year 2018/19, no-one actually knows their income for the year, but you probably have a better idea than HMRC - who tend to estimate using the previous year's data. That may explain the inconsistency.

If you don't already - and if you've got the time and inclination - it might be an idea to register for self-assessment. Then, once the following tax year has begun you can use SA to see what HMRC thinks you owe - and why - long before any submission of a return, or any payments, are due. I'm not suggesting that what HMRC compute is gospel, but they'd have a hard job blaming you if they did make a mistake!

Incidentally, as well as using the correct terminology, try to avoid oxymorons such as "My total income (apart from the £389 interest)"

Green_garnet · 12 February 2019 at 3:19PM

Thanks polymaff. I'll keep about £20 aside - just in case I do owe this to HMRC.

Do you happen to know if it is possible to send HMRC a message on line when logged into Personal on line Tax Account? I did look but could not see a link.

Oh - and thank you for mentioning the oxymoron. Changing the subject, I know, but I am learning and, seriously, I actually have a book from the library at present about grammar and punctuation etc. It is called: 'Have you Eaten Grandma?' It is by Gyes Brandreth. I've just started reading it - so I'll learn more about oxymorons.

Thank you very much for replying.

Green garnet

polymaff · 12 February 2019 at 3:47PM

Green_garnet wrote: »

Do you happen to know if it is possible to send HMRC a message on line when logged into Personal on line Tax Account? I did look but could not see a link.

Oh - and thank you for mentioning the oxmoron. Changing the subject, I know, but I am learning and, seriously, I actually have a book from the library at present about grammar and punctuation etc. It is called: 'Have you Eaten Grandma?' It is by Gyes Brandreth. I've just started reading it - so I'll learn more about oxymorons.

HMRC don't like getting into emails, text or other firm records of conversations - and I can understand why. The calibre of their advice is pretty poor - and very variable. I have a few high-level contacts in HMT/HMRC that I correspond with via email - but even they run for cover when pressed.

That Brandreth chappie has rather ripped of the subject and title-style of Lynne Truss' "Eats Shoots & Leaves". For the want of a comma . . .:)

Ironically, most references on the Web to Ms. Truss' book insert a comma after the word "Eats" - solidly making her case regarding the loss of all aspects of grammar nowadays !

Have a think about my suggestion. It is many years since HMRC has - if they ever have - fielded working SA software, but I find that when folk post a barmy HMRC calculation, it is useful to have my SA page available as a "test-bed" on which I can try to crack HMRC's mayhem. Just stopping befor the submit point and then - in mid-January - loading it with my own data and doing a full submission.

Green_garnet · 12 February 2019 at 11:14PM

Thanks polymaff. My income is low and I am happy to keep things as simple as possible, without self assessment. My outgoings are low too so it's not a problem.

I should spend time brushing up on my grammar and punctuation! I'll look out fot the Lynn Truss book.

Thank you again.

Green garnet

polymaff · 13 February 2019 at 7:31PM

Green_garnet wrote: »

Thanks polymaff. My income is low and I am happy to keep things as simple as possible

This is something I posted a couple of years ago that might help. It has a few shortcomings nowadays for higher-rate taxpayers, it doesn't cope with later Scottish/Welsh variations - and a few parameters will have to change to suit more recent tax years, namely,

The 11,000 (the personal allowance, 11,500 for 2017/18, 11,850 for 2018/19)

The 16,000 (personal allowance plus 5,000)

The 43,000 (45,000 for 2017/18, 46,350 for 2018/19)

The MAT allowance of 1,100 (1,150 for 2017/18, 1,190 for 2018/19)

and the "first £5,000 of dividend income" is down from 5,000 to 2,000 for 2018/19.

I think that it still helps one to visualise a system which does have a reasonably logical foundation.

https://forums.moneysavingexpert.com/showpost.php?p=72339700&postcount=1

badmemory · 14 February 2019 at 3:46AM

Please note that HMRCs "simple assessment" which replaced self assessment for some people is not to be trusted. You must check the figures they use yourself - this is your responsibility, as they will not take responsibility for any of their errors.

Green_garnet · 14 February 2019 at 7:32AM

Thanks for all the replies and thank you, again, polymaff.

I'll read through your link later and I'm looking out for the Lynn Truss grammar book.

In my young years it was called 'Further Education' and today it's 'Lifelong Learning.'

Everything is helped by MSE and the good people who share their knowledge and opinions here - so well valued, thanks.

Green garnet

Baffled by tax

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