2007/8 tax coding: savings

[Leftie]

Is nothing sacred!!!!

I have just had my tax coding for 2007/8. HMRC has of course got it wrong an all fronts, but I would be interested to know if/how HMRC know how much I have in savings?

HMRC has sent me a tax code that takes into account the money I owe/may owe (which?) in tax on the interest on my savings, because they want the extra for my 40% tax banding. I thought I had squared HMRC just before Chrimbo with a cheque for 2005/6. I presume therefore that the 2007/8 coding is for tax on interest he THINKS I may earn as he has had his bit for the year?

Thing is, how does HMRC know I have received/will receive interest on savings? Does my bank tell them? Also, most of the accounts are joint with Mrs Leftie, so really only half the interest is mine. How does the tax man make this presumption, because it looks like he has hit me with a the bill for the lot ( in fact I think HMRC have made the numbers up and added his telephone extension number).

I was thinking I might lend the savings to the business at a zero rate of interest, where at least it can gain interest for my company and we can pay 19% on it and I'll take it back later and take the interest as share dividends at some point rather than pay the 40%. is that idea flawed in some way.

Tomorrow he and I will talk!

[2 sMoKiN bArReLs]

They base it on the previous year. If it's gonna be different you can appeal to get it reduced.

(Actually 05/06 return)

Edited by 2 sMoKiN bArReLs on Wednesday 24th January 21:31

[2 sMoKiN bArReLs]

Look on the bright side, at least they ain't asking you to pay the extra tax in advance installments

[Leftie]

2 sMoKiN bArReLs said:

Look on the bright side, at least they ain't asking you to pay the extra tax in advance installments

I thought I had paid for 2005/6. I did my eturn in April 2006 and had a bill last month for just over £3000, which I paid.

Does it never end?????????

[2 sMoKiN bArReLs]

Leftie said:

2 sMoKiN bArReLs said:

Look on the bright side, at least they ain't asking you to pay the extra tax in advance installments

I thought I had paid for 2005/6. I did my eturn in April 2006 and had a bill last month for just over £3000, which I paid.

Does it never end?????????

I mean they could be asking you to pay in advance for 06/07!! (They asked me, but I persuaded them otherwise )

[Eric Mc]

The Revenue recently upped the lower threshold for collecting taxes from non-PAYE sources through the PAYE system from £500 to £2,000. Therefore, people are seeing far more sizeable chunks added on or removed from their PAYE codings. The Revenue state that this is "helping" tax payers as they need not worry about having to make one-off tax payments under the Self Assessnment system and can, instead, pay the liability in "instalments" without fear of late payment charges or interest being levied.

HOWEVER, in most cases, this system of collecting is heavilly weighted in favour of the Revenue - not the tax payer

i) many taxpayers PREFER to pay Self Assessment tax liabilities using Self Assessment tax payments.

ii) the Revenue are using this system to try and PREDICT what income from interest, self-employment, rent etc is for FUTURE tax years will be. Inavriably, they will get it wrong (they aren't clairvoyants) so the tax deducted throough your PAYE will be always INCORRECT.

iii) by collecting through PAYE they are getting their hands on YOUR money WAY before they would normally be entitled to under normal Self Assessment payments. If you pay Self Assessment tax in the normal manner too early, the Revenue will refund the amount back to you AND give you some interest. If you pay it too early UNDER PAYE, you are not entitled to ANY interest.
Why pay tax commencing in April 2007 when it may not be properly payable until January 2009 - nothwitshtanding the fact that you will be paying the wrong amount anyway?

Edited by Eric Mc on Thursday 25th January 09:55

Edited by Eric Mc on Thursday 25th January 10:38

[greenie]

They did the same me but on my dividends. Basically they are trying to get the money up front (perhaps Gordon has a cash flow crisis).

Quick call to your accountant/tax office will get it sorted.

They try it on with most people in the hope a few can't be bother to change and it sticks. If I was being negative it comes all the way from the top so that on budget/pre budget day Gordon can stand up and announce that the deficit is less than he forecast. And the tts sitting behind him on their gold plated pensions all wave their order papers and shout "here here" and his fragile ego is massaged and he can sleep at night feeling all warm and fluffy. But I'm not being negative so I'm sure that isn't really how it happens!

When you think about it if a bank/insurance company tried the same trick it would be illegal but somehow it is OK for the revenue. Go figure.

[Leftie]

I have just spoken with them (phone lines are mega busy).

They have wiped off my company car, as I swopped it for a basic mileage payment for my own car last week. I explained that I intend to be under the 40% banding for 2007/8, and that therefore their predictions on interst will be wrong. They agreed and are dropping me back to the bog standard code from a K640 code.

Bit naughty of them to 'predict' in this way and have my money in their account for what interest I MIGHT receive on savings in the next year, IF I pay tax at 40%, when I have that money earmarked for a new car and will now definitely stay below the 40% level!