Savings tax allowance - clarification query

Firstly it isn't an allowance. It is a 0% tax rate

Which can mean you still have extra tax to pay even when there is no tax to be paid on the interest itself.

The Personal Savings Allowance only comes into play if your taxable wages/benefits/pension/savings interest etc goes over £16,850 (current tax year).

If your taxable income from wages/benefits/pensions etc is less than £16,850 then you may be to benefit from savings starter tax rate. This is upto £5,000 of savings interest which can be taxed at 0% and, where applicable, this applies before the Personal Savings Allowance rate applies

On the assumption you are not filing Self Assessment returns then the simplest thing to do is to tell HMRC the interest and they will take it into account. The timing of that depends how you want to pay the tax. Tell them now how much interest you expect to receive in the current tax year and they will adjust your tax code and collect any tax due over the course of the rest of the year.

Tell them after the tax year ends and they will send you a calculation showing the tax due and will normally collect it by an adjustment to your tax code in the next tax year. For example

May 2019 (in the 2019:20 tax year) you declare interest for 2018:19.
HMRC send you a claculation for 2018:19 and will adjust your tax code for 2020:21 to collect the tax due
They may also then amend your 2019:20 tax code to include an estimate of the interest receivable in that tax year so you are paying some of the tax due for 2019:20 during that year itself.

This can be a little confusing as the interest will be the same as you received in 2018:19 (unless you give a more accurate estimate for 2019:20) but that tax code adjustment to include interest is not to collect the tax due from 2018:19.

HMRC will never adjust your tax code to collect the tax due from an earlier year like that. Any tax from an earlier year would be described as an underpayment or tax owed.

Although the banks are supposed to be notifying HMRC of the untaxed but taxable interest it does not appear to be going well. They also don't appear to have any algorithms in place to tell them that the figure is way out even with a drop from the previous year.

What I didn't include in my post above is that for the last financial year HMRC had my taxable interest as only £92 (it had been over £900 the previous yr) when it should have been £748.


This would class as my error because the figure was on the paperwork from them. How many people are going to ring them & challenge the figures they produce.



I'm still debating whether to let them save me over £50 tax next year because the DWP are incapable of notifying them of the correct state pension figure.

No. As I wrote, you must report by tax year.

August to August splits over two tax years

Ask the taxable interest payers to send you a Certificate of Interest Paid for, say, tax year ending 5th April 2018, add up the figures and then, at the appropriate time, tell HMRC "in the tax year ending 5th April 2018 I received £x.xx of taxable savings income".

The appropriate time would be just after the end of the tax year. Others with experience of non-self-assessment will calibrate the term "just"

For some interest payers you can download the Certificate of Interest Paid from their website. For others you need to phone or visit. Worst case is that you have to scrabble though a bunch of statements to get the figure.