Personal Savings Allowance guide

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  • polymaff
    polymaff Posts: 3,903
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    Chris4 wrote: »
    Thanks. So to confirm, the answer to my question is yes - I will receive 3% interest rather than taxed 2.4%?

    Well, to be precise, you will receive 2.96% from today.

    Unless the banks get it wrong. :(
  • dwtmahdc
    dwtmahdc Posts: 68
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    I was trying to work out how this would effect my interest, and realised I wasn't sure how to calculate.

    So: do Santander;

    - Pay 3% a year, taking into account compounded monthly interest
    or
    - Pay .25% a month, (3% over 12 months)
    or
    -Neither.

    Probably a stupid question, but hey ho :D
  • polymaff
    polymaff Posts: 3,903
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    dwtmahdc wrote: »
    I was trying to work out how this would effect my interest, and realised I wasn't sure how to calculate.

    So: do Santander;

    - Pay 3% a year, taking into account compounded monthly interest
    or
    - Pay .25% a month, (3% over 12 months)
    or
    -Neither.

    Probably a stupid question, but hey ho :D

    They pay on the basis of daily calculation, so if it is 30 days since they last made a payment they will pay the sum of 30 calculations of each day's cleared-for-interest-earning-purposes closing balance times 0.0296 divided by 365.
  • Puzzled to read that HMRC are sending out 2016/17 coding notices with estimation of gross savings interest to be earned over the year which exceeds £1,000 maximum for PSA (personal savings allowance). Puzzled for 2 reasons:-

    1. Everything I have read previously has made it pretty clear that (presumably by a cutoff date in early 2017) HMRC would assess all taxpayers' savings interest earned in 2016/17 and bill them for tax on any excess over £1,000. The"bill" would be a deduction from the 2017/18 tax code for the individual on PAYE, or would be paid via self-assessment.

    2. How can HMRC possibly know, except for people who have been sending in regular tax returns, what savings interest and individual is "likely" to earn in 2016/17? My wife and I are retired and have been placed for some years by HMRC among the many retirees who receive exclusively income from pension/s, plus possibly some from savings/shares, and who do not need to submit an annual tax return unless anything changes to mean that they are underpaying tax.

    It is possible that one or the other of us just might, in 2016/17, earn savings income over £1,000. If so, I would expect the deadline for the HMRC computer to tot this up before the end of that tax year and deduct the excess from the relevant personal allowance. We would presumably have the time to disagree with the official calculation if our records showed it to be wrong. Alternatively, I wonder if we would be offered the option of paying off the excess tax in a lump sum, so as to avoid muddying the tax coding waters?

    I read widely that very few taxpayers will earn more gross savings income than the £1,000 tax-exempt allowance for 2016/17. For the few who might, it would surely be logical to assess any over-run at a cutoff date quite late in the tax year, and bill them either via the 2017/18 coding, or via a lump-sum bill, or via a self-assessment tax return?
  • colsten
    colsten Posts: 17,597
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    carlh93sky.com, if your tax code is wrong, just call HMRC and get it changed.
  • polymaff
    polymaff Posts: 3,903
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    I read widely that very few taxpayers will earn more gross savings income than the £1,000 tax-exempt allowance for 2016/17. For the few who might, it would surely be logical to assess any over-run at a cutoff date quite late in the tax year, and bill them either via the 2017/18 coding, or via a lump-sum bill, or via a self-assessment tax return?

    But HMRC want your money - and they want it NOW.

    Hence they chosen to follow the path well-trodden by the awful Payments on Account process. :(
  • Vortigern
    Vortigern Posts: 3,242
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    2. How can HMRC possibly know?
    The banks tell them.

    The banks have been deducting tax from your savings up to now, and submitting it to HMRC, who will now assume that you'll receive the same amount of gross interest this year.
  • Doc_N
    Doc_N Posts: 8,267
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    Vortigern wrote: »
    The banks tell them.

    The banks have been deducting tax from your savings up to now, and submitting it to HMRC, who will now assume that you'll receive the same amount of gross interest this year.

    In theory, yes, but in practice, no. The HMRC/bank interface isn't yet sufficiently well developed to be able to show actual interest for individual taxpayers. It may for some, but it's not reliably accurate.
  • hjghg5
    hjghg5 Posts: 55
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    My Santander 123 interest was paid today and i can confirm it came through with no tax deducted at source.
  • Grimgrum
    Grimgrum Posts: 23
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    Hi Can someone help me understand this.
    A person earns £17,000.00 pounds and is taxed on this. They also receive £1000.00 interest on savings and will not be taxed on this.
    A person has a taxable income of £15,000 and savings interest of say £3000 but they will be taxed on the £1000.00 or £1200.00 of interest above the £16,800 or £17,000 limit (I'm not sure which it is). Is there still a difference between earned and unearned income?
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