Advice please on Interest on savings.

[Scaleyback]

On my Tax code notice Apr 26 - apr 27 under the heading

" This is how we worked out your tax code "

N:B Now I understand any interest earned over £1000.00 is taxed at my tax rate i.e 20%

There is a heading " Less Untaxed Interest, followed by a number (for privacy lets call it £200.00

My query, is that a gross figure ? i.e is my Total Tax free amount going to fall by £200.00 or by 20% of £200.00 i,e £40.00

Only when I know how they are calculating this will I have an idea if my tax code notice is correct !

Here's hoping I have made myself understandable.

Many thanks

 

[Regular.Cyclist]

If I am reading this correctly you can earn up to £1,000 in interest before being taxed on it, but actually earned £1,200 interest.

Your tax allowance will drop by the extra £200 and you will pay 20% tax on that amount.

 

[Bonefish Blues]

I have this too - my TFA has been reduced by a relatively small amount to account for taxable interest.

I've only just found out, coincidentally, so I've not yet spoken to HMRC to find out why they've applied this, because I'm certainly well under the point at which any interest might be taxable, and have never been in a position where I've exceeded the threshold.

 

[Dag Hammar]

Scaleyback, I’m not qualified to answer your specific question but do you have a wife that either does not work or has a low income = less than £12570 ? Or even under £17570 ?
As well as being allowed to earn £1000 interest tax free there is a further £5000 in interest that can be squeezed if your circumstances fit the criteria. The link below may be helpful.
https://www.gov.uk/apply-tax-free-interest-on-savings
Incidentally, Martin Lewis on his money show Tuesday 10th February ( ITV ) covered several financial matters whereby husbands + wives ( and civil partnerships ) can benefit by sharing allowances.

 

[nogoodnamesleft]

I've only just found out, coincidentally, so I've not yet spoken to HMRC to find out why they've applied this, because I'm certainly well under the point at which any interest might be taxable, and have never been in a position where I've exceeded the threshold.

These days HMRC are far "greedier" than they used to be. In my case they are requiring I pay tax on account for the year to come based on last year's higher interest rates (ie overestimating my interest earnings). I can appeal but if I then underpay they'll charge me interest whilst if I meet their demands and overpay they'll charge won't pay me interest on the amount. Very one sided and very unfair.

 

[DCLane]

Note that if you're a higher rate taxpayer then your interest allowance is only £500

They'll try to squeeze you every way they can

 

[chris-suffolk]

You can actually earn up to the tax threshold - 12750 (?) + 5000 + 1000 before you pay tax on interest. So if you earn less thn 17750, you can get quite a decent amount of interest tax free - which is exactly why most of our savings are in my wifes name.

 

[Scaleyback]

Scaleyback, I’m not qualified to answer your specific question but do you have a wife that either does not work or has a low income = less than £12570 ? Or even under £17570 ?
As well as being allowed to earn £1000 interest tax free there is a further £5000 in interest that can be squeezed if your circumstances fit the criteria. The link below may be helpful.
https://www.gov.uk/apply-tax-free-interest-on-savings
Incidentally, Martin Lewis on his money show Tuesday 10th February ( ITV ) covered several financial matters whereby husbands + wives ( and civil partnerships ) can benefit by sharing allowances.

Yes, thank you Dag, I already receive 10% of my wife's personal allowance as indicated by the ' M ' after my tax code. 🤗

 

[Scaleyback]

If I am reading this correctly you can earn up to £1,000 in interest before being taxed on it, but actually earned £1,200 interest.

Your tax allowance will drop by the extra £200 and you will pay 20% tax on that amount.

I think you have a good point there and if so I will pay tax at 20% on the £200.00 as opposed to having my total tax-free amount allowed reduced by £200.00 ? Many thanks.

 

[Regular.Cyclist]

I spoke to my wife about this as she found herself in a similar position earlier in the year. She was given the option of paying the tax now or paying it as part of PAYE over the next year. She was off the.opinion that they could wait and get it back at a little bit per month.

In this case I assume you have the option of paying £40 now or £40 in smaller instalments via your pay.

 

[wiggydiggy]

Scaleyback, I’m not qualified to answer your specific question but do you have a wife that either does not work or has a low income = less than £12570 ? Or even under £17570 ?
As well as being allowed to earn £1000 interest tax free there is a further £5000 in interest that can be squeezed if your circumstances fit the criteria. The link below may be helpful.
https://www.gov.uk/apply-tax-free-interest-on-savings
Incidentally, Martin Lewis on his money show Tuesday 10th February ( ITV ) covered several financial matters whereby husbands + wives ( and civil partnerships ) can benefit by sharing allowances.

Something I learned recently but too late unfortuately to use, was that you can inherit someones ISA tax free alowance. https://www.gov.uk/individual-savings-accounts/inheriting-an-isa-from-your-spouse-civil-partner

Worth reading up on to get everything you can back from the government.