Personal Savings Allowance on bank interest, tax return question

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superlative
superlative Posts: 37 Forumite
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in Cutting tax
The new Personal Savings Allowance means I shouldn't have to pay any tax on interest under £1k, right? The general advice out there seems to be that you still need declare it on your tax return, but that you won't be taxed on it.

However I've just done this, added my approx £250 of interest under untaxed interest. The calculation shows it's being treated as taxable income, and I am paying tax on it.

If I delete the bank interest section, my tax bill goes down.

I can't see anywhere on the form to somehow opt in the PSA

What I am supposed to do?


FYI I pay only basic rate, and need to do tax return for PAYE, self employment and property.


TIA
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  • Pennywise
    Pennywise Posts: 13,468 Forumite
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    Have you declared it in the UK bank interest section? There are other sections for other types of interest which won't be zero rated by the PSA, so I suspect you've entered it in the wrong section.
  • superlative
    superlative Posts: 37 Forumite
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    edited 11 October 2018 at 1:45PM
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    Yes I've put it in the right place. It's showing in the calculation as Interest from UK banks.

    I've figured out what's going on. The tax has been calculated correctly and I'm not being taxed on the bank interest.

    The difference is because additional income, even though not taxed, has increased my Student Loan repayments. So when I complete the interest section of the tax return, my total due increases slightly because of that.

    What confused me is the interest is included under 'Total Income on which tax has been charged'. However when you look at the numbers, it's been 'taxed' at 0%.

    Good to know I guess - interest is still income for student loan purposes, the PSA doesn't change that.

    Glad I figured it out anyway.
  • superlative
    superlative Posts: 37 Forumite
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    ... which of course would be one of the reasons we are still asked to declare it.
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
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    There are several other situations where this supposed "tax-free" income actually increases the amount you have to pay even though the income itself is taxed at 0%.

    Reduction of Personal Allowance (where income is over £100k), High Income Child Benefit Charge and Married Couple's Allowance can all be impacted in a similar way.

    And dividends taxed under the "Dividend Allowance" nil rate band have the same impact as well.
  • superlative
    superlative Posts: 37 Forumite
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    edited 12 October 2018 at 7:01PM
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    Thanks Dazed, useful to know. I did wonder why HMRC are still insisting we declare interest when below the PSA amount. If the interest tips you over a certain threshold, (eg the Student Loan repayment threshold), the 'penalty' could be quite high. In my case it's only a few quid.

    I suppose anyone who isn't asked to fill in a tax return, would just fall under the radar on this issue.
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
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    No, are required to send the interest details to HMRC each year so most people should be taxed correctly.
  • glider3560
    glider3560 Posts: 4,115 Forumite
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    As an opposite way of doing things, the new £1000 "trading allowance" doesn't have to be declared, nor does it count as income for any other purpose.
  • superlative
    superlative Posts: 37 Forumite
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    Hang on, I've just read this on the MSE student loan thread here:

    For the self-employed/ those with other income: If you are self-employed, you are responsible for notifying HMRC of payments when you do your self-assessment form.
    If you have additional income of £2,000+ from savings interest, pensions or shares and dividends, this will also be treated as part of your income for repayment purposes and you'll need to repay 9% of that, again via self-assessment.


    £2000? That implies anything under that shouldn't be counted. But my £250 is.

    Any insight, anyone?
  • superlative
    superlative Posts: 37 Forumite
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    I keep answering my own questions. Apparently property income is also counted towards the £2k.
  • superlative
    superlative Posts: 37 Forumite
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    glider3560 wrote: »
    As an opposite way of doing things, the new £1000 "trading allowance" doesn't have to be declared, nor does it count as income for any other purpose.


    I have too much self employed income and related expenses, for the trading allowance to be useful to me, this year at least. But yeah, if applicable, it'd be helpful on this issue too.
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