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bigduckontax
bigduckontax, Accountant
Category: Tax
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Since April 2016 banks do not take tax from savings interest

Resolved Question:

Since April 2016 banks do not take tax from savings interest so I let HMRC know how much interest I earned last year (tax year 2016/7). They sent me a bill which I paid. Now they have adjusted my PAYE tax code by forecasting that I will earn same interest this year. Is it normal practice for them to tax money I haven't yet received? If I had not informed them would they have taken tax owed for last year plus this year, because that's effectively what they are doing.
Submitted: 2 months ago.
Category: Tax
Expert:  bigduckontax replied 2 months ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

How much was your interest received in 16/17. The first 1K is tax free.

This procedure is perfectly normal to make you tax neutral at the year end. You should check that the adjustment is correct. In these situations it is essential to keep a beady eye on your tax codes.

Customer: replied 2 months ago.
I don't think I mentioned, I'm an 81 year old pensioner no longer working. I earned interest of £1,879.60 gross last year. HMRC sent me a bill for £177.20 based on the £879 after deduction of £1,000 tax free which I thought was slightly out but not enough to be important. My annual gross income is around £16,000.
Expert:  bigduckontax replied 2 months ago.

You are quite correct, HMRC should have charged you GBP 175.92, typical sloppy, slovenly HMRC approach. Personally I don't let the taxman make mistakes like that and tend to come down on them like a ton of bricks. With a total overall income of 16K you will be well within the basic rate Income Tax (IT) bracket at 20%. Just to rub it into them I would suggest that you insist on your tax code being reduced to recover current year unpaid tax and watch them squirm.

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Customer: replied 2 months ago.
Hi Keith. Many thanks for your reply. I understand now the "tax neutral" element and I'll take your advice re recovery of current year unpaid tax.
Expert:  bigduckontax replied 2 months ago.

Thank you for your support.

Expert:  bigduckontax replied 2 months ago.

And your kind bonus.