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    • CashSaver48
    • By CashSaver48 10th Aug 18, 12:01 PM
    • 7Posts
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    CashSaver48
    Savings tax allowance - clarification query
    • #1
    • 10th Aug 18, 12:01 PM
    Savings tax allowance - clarification query 10th Aug 18 at 12:01 PM
    Hi Guys,

    This is a totally newbie question, so I apologise in advance.

    In the last year I inherited some money. I wanted to work out plans for the future, so to at least do something with it in the meantime I put 80K of it into the best savings accounts I could find at the time. This has yielded around 1.6K over the last year, which i got back last week.

    NOW.
    My question is about the 'savings tax allowance', and how it applies, kicks in etc.
    How's it work? Is it automated by the banks letting the powers that be know how if i've gone over the 1K annual limit of earnings, and taxing me according.
    Or...
    Do i need to announce to them?
    What the protocol here?

    My research so far is inconclusive, so thought i'd ask you guys to get a straight answer.

    thanks
Page 1
    • Dazed and confused
    • By Dazed and confused 10th Aug 18, 4:12 PM
    • 3,288 Posts
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    Dazed and confused
    • #2
    • 10th Aug 18, 4:12 PM
    • #2
    • 10th Aug 18, 4:12 PM
    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.
    Last edited by Dazed and confused; 10-08-2018 at 4:15 PM.
    • polymaff
    • By polymaff 10th Aug 18, 6:00 PM
    • 2,333 Posts
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    polymaff
    • #3
    • 10th Aug 18, 6:00 PM
    • #3
    • 10th Aug 18, 6:00 PM
    Just some reinforcement of the above.

    1. You are responsible for declaring taxable income, so make sure you declare it.

    2. You don't just declare how much, but how much in a particular tax year - these running from 6th April to 5th April the next year.

    3. This implies that you must know when the interest was paid. This is very obvious if we're talking about a savings product which pays the interest out to another account - but as you are talking 2% p.a., you need to tell us about the account.

    So when you are sure of the interest earned in tax year X, tell HMRC. They should then tell you what you owe. You are also responsible for paying the correct amount of tax. Some of us calculate this without relying on HMRC. but if you follow the advice and submit correct data - and HMRC then tell you what is owed by you, you're on pretty safe ground.
    Last edited by polymaff; 10-08-2018 at 6:03 PM.
    • badmemory
    • By badmemory 10th Aug 18, 7:28 PM
    • 2,274 Posts
    • 3,297 Thanks
    badmemory
    • #4
    • 10th Aug 18, 7:28 PM
    • #4
    • 10th Aug 18, 7:28 PM
    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.
    Last edited by badmemory; 10-08-2018 at 7:31 PM.
    • polymaff
    • By polymaff 10th Aug 18, 7:50 PM
    • 2,333 Posts
    • 1,029 Thanks
    polymaff
    • #5
    • 10th Aug 18, 7:50 PM
    • #5
    • 10th Aug 18, 7:50 PM
    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.
    Originally posted by badmemory
    NS&I admit thet have been sending the wrong figures to HMRC - and they say they will not be correcting their error - it'll be down to the hapless taxpayer to straighten things out.
    • badmemory
    • By badmemory 10th Aug 18, 11:10 PM
    • 2,274 Posts
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    badmemory
    • #6
    • 10th Aug 18, 11:10 PM
    • #6
    • 10th Aug 18, 11:10 PM
    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.
    • CashSaver48
    • By CashSaver48 13th Aug 18, 9:43 AM
    • 7 Posts
    • 0 Thanks
    CashSaver48
    • #7
    • 13th Aug 18, 9:43 AM
    • #7
    • 13th Aug 18, 9:43 AM
    Thanks guys, this is exactly what I needed to know. I just wasnt sure if it was automated or i needed to do a few sums and ring people to notify. I figured more likely the latter, but wanted to make sure.

    So in summary, I ring them up and let them know the interest i earned off the invested money for the time it was invested, which was Aug 2017 to Aug 2018? They'll then adjust tax code to take this into account?

    Slight sideline question.
    I'm thinking of investing the money now through HSBC, I don't have the time or more importantly the financial knowledge to run my own portfolio. They'd invest in a variety of funds, cash options etc. I want a balanced account spreading some across low, medium and higher risk.
    Do you have any thoughts on this route?

    thanks,
    • polymaff
    • By polymaff 13th Aug 18, 9:49 AM
    • 2,333 Posts
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    polymaff
    • #8
    • 13th Aug 18, 9:49 AM
    • #8
    • 13th Aug 18, 9:49 AM
    No. As I wrote, you must report by tax year.

    August to August splits over two tax years
    • CashSaver48
    • By CashSaver48 13th Aug 18, 3:58 PM
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    CashSaver48
    • #9
    • 13th Aug 18, 3:58 PM
    • #9
    • 13th Aug 18, 3:58 PM
    No. As I wrote, you must report by tax year.

    August to August splits over two tax years
    Originally posted by polymaff

    Ok, so based on the 2x tax years factor. What should my next steps be? As I wont to get this right. Can they backdate?
    • polymaff
    • By polymaff 13th Aug 18, 5:34 PM
    • 2,333 Posts
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    polymaff
    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.
    Last edited by polymaff; 13-08-2018 at 5:37 PM.
    • CashSaver48
    • By CashSaver48 14th Aug 18, 9:34 AM
    • 7 Posts
    • 0 Thanks
    CashSaver48
    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.
    Originally posted by polymaff
    Thanks.
    The Account sent me through a summary of the year letter, so details are included there.
    • polymaff
    • By polymaff 14th Aug 18, 10:01 AM
    • 2,333 Posts
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    polymaff
    Thanks.
    The Account sent me through a summary of the year letter, so details are included there.
    Originally posted by CashSaver48
    NO NO NO!

    I've been trying for years to get the providers to stop sending annual statements - which are rarely aligned to the tax year. I've had some success, but most still send out these seriously misleading trash documents based on random dates.

    Check if the one you have is tax-year-aligned. If not, get what I suggested.
    Last edited by polymaff; 14-08-2018 at 10:09 AM.
    • CashSaver48
    • By CashSaver48 14th Aug 18, 1:41 PM
    • 7 Posts
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    CashSaver48
    NO NO NO!

    I've been trying for years to get the providers to stop sending annual statements - which are rarely aligned to the tax year. I've had some success, but most still send out these seriously misleading trash documents based on random dates.

    Check if the one you have is tax-year-aligned. If not, get what I suggested.
    Originally posted by polymaff
    ok, thanks for the info. I will check that and get back to you.

    Thanks again for the help, it is truly appreciated.
    • lindabea
    • By lindabea 14th Aug 18, 4:00 PM
    • 1,035 Posts
    • 148 Thanks
    lindabea
    No. As I wrote, you must report by tax year.

    August to August splits over two tax years
    Originally posted by polymaff
    Forgive me if I misunderstood something here, but I think you may be misleading and confusing the OP.

    If I understand the situation correctly, the OP put a sum of money in a savings account in Aug 2017. In Aug 2018 (he makes reference that he just received interest), he receives the interest after 1 year. This is not to say that the interest is split over 2 tax years. In fact, it is interest received in Aug 2018 in the 18-19 tax year - therefore declarable in 19-20 tax year.
    Before doing something... do nothing
    • polymaff
    • By polymaff 14th Aug 18, 7:36 PM
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    polymaff
    Depends how you interpret "got back". You want to interpret it as "received" - and you've built your entire post on that assumption being true. I've decided to give the OP the basic principles he should apply this time - and next time, too.

    "Give a man a fish ..."
    • lindabea
    • By lindabea 15th Aug 18, 11:43 AM
    • 1,035 Posts
    • 148 Thanks
    lindabea
    Depends how you interpret "got back". You want to interpret it as "received" - and you've built your entire post on that assumption being true. I've decided to give the OP the basic principles he should apply this time - and next time, too.

    "Give a man a fish ..."
    Originally posted by polymaff
    The actual OP's comment is 'This has yielded around 1.6K over the last year, which i got back last week.'

    Hmmm.... let me think. No - not worth it. I give up!! How else would you interpret 'got back' if not received. But, I will agree with you regarding making an assumption - the only assumption I have made is that he invested the money in Aug 17 not whether got back means received. But if you want to nit-pick to argue black is white, I don't play that game. I just made a comment that in my opinion, you were going out of your way to be unneccessarily too pedantic.
    Before doing something... do nothing
    • CashSaver48
    • By CashSaver48 16th Aug 18, 1:55 PM
    • 7 Posts
    • 0 Thanks
    CashSaver48
    Hi Guys,

    To clarify, I invested the money August 2017 and they returned my money with interest to my main back account this August 2018.

    thanks
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