Can someone explain why a tax code can be slightly less due to untaxed interest on savings and investments.
What I donāt understand is you get interest for maxing out an account in a bank but it seems its kind of pointless if your tax code reduces by the amount of interest you get from using the banks account?
You might have to give more details. You donāt get taxed on savings interest up to a certain amount. This amount depends on your other incomes.
OK so Iām talking about a banks vantage that you need to have 2 direct debits per month and Ā£1000 going in it to gain the interest.
The interest uses to be Ā£100 a year but now its Ā£46 ish and thatās what has been deducted from my tax code. The account maxes our at 5k
what was the interest the bank paid last year compared to this year?
you have a tax free rate for interest based income. this reduces to zero if youāre making over Ā£150k a year. im not sure how thatās collected thoughā¦ are you sure the bank hasnāt just changed the interest rate?
The interest rate has been getting lower and lower the longer I have held this account it made Ā£43 buck ish over last year and the year before was Ā£58 or so.
I donāt make anywhere near that cash Iām lower teir, Iām just trying to understand why my code gets changed it said - 75 last time and I phoned hmrc and they gave me a full code back.
So presumably thatās just the rate for the account that the bank is offering you. Its not likely anything to do with tax.
your tax code changing could be for many reasons. the basic tax code is 1257 at the moment
What do HMRC actually say about your tax code?
Could be that interest isnāt taxed at source. What bank is it?
Yes thatās what am trying to find out why itās lower as I donāt have anywhere near the amount to be taxed for investments or my total annual income which was way way below the norm.
I will maybe need to phone them but when you ask them they canāt tell you where the uesrned tax is from, they just told me they only see it on their system as from savings and investments.
Bank of scotland. Its when I use the hmrc app you can click on whatās my tax code and then it gives you details of your tax code, then you see the unearned tax in there.
a vantage account? the maximum you can earn in interest is Ā£24 on the first 4k and Ā£15 on the next 1k for a total of Ā£39 for the year. (0.6% on the first 3k, 1.5% on the next 1k)
edit: in 2020 they offered 1% on the first 3k and 2% on the next 1k. its not tax, the rates your bank is offering has just gone down.
OK thanks for that information but why would Hmrc see that as untaxed Income if it did? I donāt have anything else coming in, I donāt have big capital or high paying jobs.
Thanks
Isnāt the tax free allowance on savings interest a Ā£1000?
So even at the best rates (1.5% I think) youād have to have Ā£67,000 to breach that over 12 months.
Can only assume Bank of Scotland or another financial institution (or a combination) you have savings with donāt know your income or have the wrong income and reported incorrectly to HMRC
That would be the best guess based on what youāve described.
These types of changes happen for a variety of reasons and it would be a waste of time enumerating them here. In my case these things got corrected via the Self Assessment declarations. If you donāt submit an SA the correction often happens after filling in a P800 form. My suggestion to you is call them up again and tell them that you donāt have dividend/interest income that exceeds Ā£2000 and accordingly you donāt understand what has been untaxed.
Additionally, if you have left an employment recently or have joined a new company your former employer may have not deducted some final tax and declared that to HMRC and/or you may be under an emergency coding. This would explain the discrepancy.
This may help you:
Thatās people for giving me information. I think I will give them a call like you said and get them to correct it, thanks again 
Yeah, just give HMRC a call. I incidentally talked to them today and they fixed my issue quickly even though itās the first day of the new tax year and likely lots of calls.
I have had the same problem, tax code reduced by Ā£80/ After waiting a couple of hours, got through to HMRC who did not really have a clear answer. It seems that it is coming from the bank and applies if you earn less than personal allowance and is related to interest on savings. It has not happened before so not sure why they are taking it away from tax code last year and this year. Tax people say not to worry and it will all be OK. I wont be taxed on it and they wont really take it away from my personal allowance. So still a mysteryā¦ but hopefully it wont affect my tax position when I get my pension increase next month. They say that they will just increase my tax code and will ignore the bank amountā¦I should not have to pay tax. Lets see! Will be interesting if anyone else can find out more.
Yeah weird eh, they canāt tell you where itās from Usally just that itās on there.
I did phone them kn my break but it took to long so hung up and the next day or was it the end of the day I checked again and I had a new tax code again with a new estimated income so seems sorted now
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