Personal Savings Allowance guide
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In my 35 years experience between 1971 and 2006, not one of the computer systems/projects/solutions introduced by HMRC (or IR as I prefer to remember it) ever worked as intended.
On the contrary, many seemed to involve reinvention of rectangular wheels. That includes both internal and customer:cool: facing innovations.
I'm yet to be persuaded that Personal Tax Accounts or Making Tax Digital will be different.:(:(0 -
In my 35 years experience between 1971 and 2006, not one of the computer systems/projects/solutions introduced by HMRC (or IR as I prefer to remember it) ever worked as intended.
On the contrary, many seemed to involve reinvention of rectangular wheels. That includes both internal and customer:cool: facing innovations.
I'm yet to be persuaded that Personal Tax Accounts or Making Tax Digital will be different.:(:(
Not just in the Public Services.
When 98.6% of IT projects in the US Military were found to overrun both timescale and budget and to fail to perform against the most generous interpretation of the specification, a project was launched to study the software development staff - both civil and military - that were involved. Every characteristic of the thousands of staff assessed was "normalised" and the conclusion was that after normalisation there was still a 200:1 unpredictable span of ability.
Think about that next time you are being wheeled into the operating theatre.
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Just spoken to HMRC office regarding my wife's tax code. She has recently retired and has a state pension plus 2 private pensions but does not pay tax as she is below the threshold. However, her tax code showed "less untaxed interest " and as she doesn't earn more that £1000 in interest payments it seemed strange that she had an amount of £566 against her tax code, The explanation is, that this is a make up amount by HMRC to show she isn't paying tax on this amount.i.e the balance offset between income from state pension+ transferred marriage allowance and the current tax years personal allowance. (or how much she can earn before paying tax!) This means as her income for pensions rise HRMC will keeping adjusting this figure. i.e if she has a £200 pension increase her interest will now be £366.And of course any tax threshold increase!! Is this a work creation scheme by HMRC? This is not explained as an example on HRMC website. Has anyone noticed this is happening to non tax paying individuals.0
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The problem for HMRC is that the tax-free allowance is not a fixed £1,000 for everyone but it is UP TO £1,000. In your wife's case the allowance for that tax year was £566 presumable because she earned £566 interest in that year. It should not affect her tax code, however, unless she earned more than £1,000 interest.Just spoken to HMRC office regarding my wife's tax code. She has recently retired and has a state pension plus 2 private pensions but does not pay tax as she is below the threshold. However, her tax code showed "less untaxed interest " and as she doesn't earn more that £1000 in interest payments it seemed strange that she had an amount of £566 against her tax code, The explanation is, that this is a make up amount by HMRC to show she isn't paying tax on this amount.i.e the balance offset between income from state pension+ transferred marriage allowance and the current tax years personal allowance. (or how much she can earn before paying tax!) This means as her income for pensions rise HRMC will keeping adjusting this figure. i.e if she has a £200 pension increase her interest will now be £366.And of course any tax threshold increase!! Is this a work creation scheme by HMRC? This is not explained as an example on HRMC website. Has anyone noticed this is happening to non tax paying individuals.
Warning: In the kingdom of the blind, the one-eyed man is king.
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However, her tax code showed "less untaxed interest " and as she doesn't earn more that £1000 in interest payments it seemed strange that she had an amount of £566 against her tax code
From what you have posted the £1,000 is completely irrelevant as your wife cannot benefit from the Personal Savings Allowance (actually a 0% tax rate).
This is because you only benefit from the PSA if your income exceeds £16,850 (in the current tax year).
Below that there is either unused Personal Allowance which makes the income not liable to tax or it falls to be taxed at the savings starter rate (a tax rate where up to £5,000 of interest is taxed at 0%).
There is nothing wrong your wife's tax code. It is normal practice for HMRC to show the interest in this way in the tax code, precisely because the savings income is covered by her Personal Allowance.
Has she checked her Personal Tax Account to see what interest details HMRC hold for 2017:18? I suspect this is £566. And this is used as an estimate for 2018:19 and 2019:20 until such time as she provides a different estimate or the actual information is received from the banks (sometime after April 2019).
If her pension income was high enough that there were no spare allowances and it all fell to be taxed at the savings nil rate (aka PSA) then no deduction would be made.0 -
Just spoken to HMRC office regarding my wife's tax code. She has recently retired and has a state pension plus 2 private pensions but does not pay tax as she is below the threshold. However, her tax code showed "less untaxed interest " and as she doesn't earn more that £1000 in interest payments it seemed strange that she had an amount of £566 against her tax code,
Strange indeed, but it is one of the many bizarre aspects of HMRC's machinations. If you want to see a similar worked example in one of HMRC's in-house manuals, read from the heading "Untaxed Interest" in:
https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye12060
By the way, if the total of your wife's earnings was below her personal allowance, then the interest not covered by her personal allowance is not set against the £0/£500/£1,000 Personal Savings Allowance mentioned but the £5,000 Starter Savings Rate (to use the terminlogy used in the above link; this allowance gets a new HMRC name again and again!)
Don't forget that the PAYE tax code is not THE reference document about your tax calculation - just a predictive spin-off for the use of your paye-based payers. Form P2 causes more HMRC-induced high blood pressure than any other, I'd guess. 0 -
Thanks for this explanation. I received a letter from HMRC this week with my tax codes and my situation is very similar to your wife's. Like you, I did not understand the presumed tax interest but your explanation was very helpful.Just spoken to HMRC office regarding my wife's tax code. She has recently retired and has a state pension plus 2 private pensions but does not pay tax as she is below the threshold. However, her tax code showed "less untaxed interest " and as she doesn't earn more that £1000 in interest payments it seemed strange that she had an amount of £566 against her tax code, The explanation is, that this is a make up amount by HMRC to show she isn't paying tax on this amount.i.e the balance offset between income from state pension+ transferred marriage allowance and the current tax years personal allowance. (or how much she can earn before paying tax!) This means as her income for pensions rise HRMC will keeping adjusting this figure. i.e if she has a £200 pension increase her interest will now be £366.And of course any tax threshold increase!! Is this a work creation scheme by HMRC? This is not explained as an example on HRMC website. Has anyone noticed this is happening to non tax paying individuals.0 -
Guys, many thanks for useful replies. I'd all ready figured out the spurious data fro HMRC from my phone call. But it seems a pointless exercise showing fictitious or old data. Whilst I appreciate HMRC didn't cause the problem (the chancellor did) they are only causing themselves more work targeting some OAP's who's earnings are below the threshold. And as the explanation on PSA note 3 on their TAX notification form refers only to earnings above the allowance, it's bound to lead to anxiety and misunderstanding. Hence more communications. As tax notifcations tend to go out when allowances change e.g. state pension rises, personal allowance etc this will result in more changes to Tax codings for people in this situation. And as private pensions are not all changed at the same time, notifications to the providers is likely to result in a potential tax charge, which will then have to be refunded due to not exceeding their allowance. Is this not work creation? After all tax payers are not expected to declare to HRMC UNLESS they exceed their PSA, so why do pensioners need reminding! Pensioners will have to be on their guard to ensure they don't get taxed through a paper chasing bureaucratic exercise.0
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Don't blame anyone but HMRC. The legislation is usually quite reasonable - even some of G. Osborne's changes were quite structured - but it is when HMRC come to interpret / implement the legislation that things go awry.
As is regularly demonstrated by HMRC's never-working SA system - and the crazy, crazy implementation / documentation of Marriage Allowance Transfer.
Not to mention PSA, PoA, etc. etc. 0 -
But it seems a pointless exercise showing fictitious or old data
I agree it can be confusing but is it actually fictitious or old data?
It might be wrong - some people on another thread have reported missing accounts or tax exempt (ISA) interest being included - but the 2018:19 and 2019:20 tax codes are usually estimates based on the data from 2017:18.
Unless the person has provided a more upto date estimate.
Once the actual 2018:19 details are received from the banks codes for 2019:20 will be updated (where necessary) and the 2018:19 year reviewed to see if tax has been under or overpaid.0
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