Thousands of Brits to get letter from HMRC after new tax rule comes into force
HMRC is changing the tax code for some savers who have reached their allowance limit. Most people can earn a certain amount of interest from their savings without having to pay tax. Now, it's different.
Your allowances for earning interest before you need to pay tax on it include your Personal Allowance, starting rate for savings and Personal Savings Allowance. These allowances are given each tax year (April 6 to April 5).
The amount you receive depends on your other income. If you haven't used up your Personal Allowance on your wages, pension or other income, you can use it to earn tax-free interest. You might also be able to earn up to £5,000 in interest without having to pay tax on it. This is your starting rate for savings. In other related news, there have been state pension payment changes for August, as people have been told to 'be aware'.
The more you earn from other income (like your wages or pension), the lower your starting rate for savings will be, reports Birmingham Live. If your other income is £17,570 or more, you're not eligible for the starting rate for savings. If you exceed your allowance, then you'll have to pay tax on any interest over your allowance at your usual rate of Income Tax.
HMRC advises: "HMRC may update your tax code if you start a new job, you get taxable state benefits, you start to get income from an additional job or pension and your weekly State Pension amount changes."
Savers could face other changes if your employer informs HMRC that you've started or stopped receiving benefits from your job or you claim Marriage Allowance from the taxman.
Another tax code change could occur if you claim expenses that you get tax relief on. You might also be placed on an emergency tax code if you switch jobs and HMRC doesn't receive your income details promptly.
If there's been a change in your tax code, you can utilise the Check your Income Tax online service to discover the reason. When it comes to taxes and HMRC, it's best to start looking that you're under the appropriate tax code now, rather than leaving it for later, so you don't get a scare in the future.
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