Quick interest on savings question …

If someone earns more that their annual Personal Savings Allowance (PSA) and are employed full time are they better to await a change in tax code to reclaim the difference or approach HMRC directly?

I appreciate this may appear as a default option 1 all day long but if that person is not forecasting “earning” the same amount the following year does this mess with their tax code beyond the repayment window?

All other things being normal next years tax code or a self assessment would claim back the due tax.   If your colleague is astute you can calculate it yourself and adjust your own code on the HMRC web pages login and adjust for expected earnings to pay the tax up front – I do this to account for expected comissions.

You must have a huge amount of savings if you are worried about being taxed on it.

Since 2016, the personal savings allowance (PSA) means you get a tax-free amount of interest, earnable in any savings…

Basic 20% rate taxpayers can earn up to £1,000/year interest tax-free
Higher (40%) rate taxpayers can earn £500/year tax-free
Top (45%) rate taxpayers don’t get a PSA

I would suggest if you have savings that it will make any noticeable difference then you need to look at more tax efficient ways of saving that money !

Other than that just let it occur naturally in the following tax year

I would suggest if you have savings that it will make any noticeable difference then you need to look at more tax efficient ways of saving that money !

at 5% interest you only need £10k in savings to be tripping the barrier, its not a huge amount to have if you’ve maxxed out your isas

Was going to say, max out your ISAs first, and don’t forget you can add an additional 20k the next tax year, etc, etc, so maybe stash some into premium bonds as a stop gap as that’s tax free also…

If you’ve got so much in savings that that would still put you over the tax allowance for savings interest, I’d speak to an advisor!

As above ISA should be maxed out before putting cash into a savings account if you are High/Top allowance person. Id prob go down the Premium Bonds route too first as well.

If you’ve got so much in savings that that would still put you over the tax allowance for savings interest, I’d speak to an advisor!

Hmm in my experience they then just offer you some portfolio growth product shite thing which main purpose is to earn them a big commission.

But if your earning enough that you are starting to accrue big savings, then you need to do tax planning ie maximising pension contributions etc, buying second homes etc. But thats all for the individual to decide their route on.

can you pass on some element to a partner assuming they are a basic rate taxpayer..

and remember  Interest on joint accounts
If you have a joint account, interest will be split equally between the account holders. Contact the savings helpline if you think it should be split differently.

This person should complete self-assessment. HMRC are unlikely to have any clue about your total income situation unless you tell them.

do it before the filing deadline for the tax year.

‘but PAYE’ yeah, right.

If you have any other source of income, or are a higher or additional rate tax payer, or use gift aid, or … many other things, fill in self assessment. Then ignore HMRC when they say ‘you no longer need to complete self assessment’. Accepting that is a recipe for almost ensuring you’re paying the wrong amount of tax.

If you’re losing money to HMRC it’ll go unnoticed. If you’re underpaying, well…

edit as for paying tax on savings interest – if you’re sure you’ll be below the threshold no action needed. Savings accounts often have higher returns than ISAs and fewer complications. If you are likely to exceed the allowance then if you don’t need the money pay more into your pension. If you might need the money – ISAs. IANAIFA