Excel Tax calculator for 16-17

[hiriskpaul]

I went through this pain a few months back.

It beggers belief that HMRC can't release an approved spreadsheet.

Even a coherent document along the lines of those linked to by air04 would do. Or a set of examples that covers all the use cases. There really aren't very many. They either go for over simplicity or impenetrability.

Did you get anywhere in understanding how the PSA is supposed to work? Anything within it counting towards tax bands or not?

[XFool]

Did you get anywhere in understanding how the PSA is supposed to work? Anything within it counting towards tax bands or not?

I really am not on top of all this at all (I don't think it applies to my situation) but I did refer to it in an adjacent thread. So far nobody has picked up on my comment so...

I mentioned that in my Personal Digital Tax Account the way the PSA has been handled looking forward to the 2017-18 Tax Code calculation seems different to how it was handled this tax year. It has NOT been added on to the Personal Allowance, as it was this tax year. Rather it seems to have been applied in 'parallel' in like manner to how the Dividend Tax Allowance was handled this year. I don't think this affects me but I don't know how it would work wrt the 0% Savings Band or affect tax thresholds. This meant that, though the Personal Allowance goes up £500 for 2017-18, my Tax-free allowances for that year go down £500.

[paulnumbers]

I went through this pain a few months back.

It beggers belief that HMRC can't release an approved spreadsheet.

Even a coherent document along the lines of those linked to by air04 would do. Or a set of examples that covers all the use cases. There really aren't very many. They either go for over simplicity or impenetrability.

Did you get anywhere in understanding how the PSA is supposed to work? Anything within it counting towards tax bands or not?

I'm loathed to show you my spreadsheet as I've not doubt made errors. But I figured I was close enough.

My understanding was you calculated adjusted net income so you know what your PSA is

https://www.gov.uk/guidance/adjusted-net-income

And then instead if interest received was X, I added X-PSA to my income for the interest component.

I honestly don't know if it's right or not, and I do need to confirm before the end of the tax year as I don't want to push into the 40% bracket and lose it.

In my particular case this year, I have* £8060 salary, £2000 interest before tax, and the rest dividends. As I want to fine tune the dividends, I believe that I can pay myself £32940 in dividends without losing the PSA.

=43000-8060-2000= £32940

So basically the PSA is irrelevant concerning whether you breach higher rate tax or not.

Any thoughts?

*numbers slightly fictitious

[air04]

Thanks XFool.

Paul,
I think PSA is not in any band based on the below, I am happy to be corrected. It is based on XFool's tax code.
viewtopic.php?f=49&t=2867#p27184

My Personal Allowance for next year is shown as due to fall from £12,000 to £11,500. I didn't realise this was being reduced! I thought it was heading toward £15,000pa. Trying to check the figures on HMRC's site they are telling me the PA for this year is £11,000!
....

No. The PA was £11,000 + £1,000 Personal Savings Allowance = £12,000 Your tax-free allowances. I had temporarily forgotten that from last year. Though the calculation for next year's Tax Code appears to be done differently....

XFools is in HR band totally, so he gets £500 PSA. If the PSA used up the band, the Personal Allowance would not be increased by £500, but by £250. Increasing by £500, means he gets a £500*40%=£200 benefit. But, if PSA was using up BR band, they would need to give him only £100 benefit(so increasing personal allowance by £250).

Does it sound sensible?

Cheers,
ap

[XFool]

XFools is in HR band totally, so he gets £500 PSA. If the PSA used up the band, the Personal Allowance would not be increased by £500, but by £250. Increasing by £500, means he gets a £500*40%=£200 benefit. But, if PSA was using up BR band, they would need to give him only £100 benefit(so increasing personal allowance by £250).

No. This is being misunderstood.

AFAICS nothing (apart from my personal circumstances) has changed this tax year, 2016-17. It is unlikely I can help anyone with their tax calculation for this tax year. Gengulphus offered detailed help on a TMF thread with calculations involving the zero rate saving band and tax bands wrt this tax year, 2016-17.

I am trying to flag up what looks to me like a possible change to the Tax Code calculation in the next tax year, 2017-18, which may effect some people here. Though, AFAICS it will not effect me. I don't really know if the change is significant or exactly what effect it could have.

This year, on HMRC figures I an a BR taxpayer. My PA is £11,000. My PSA is £1000.
My 2016-17 Total Tax-free Allowances are calculated as:

£11,000 + £1,000 = £12,000 (PA + PSA)

That is how it was calculated to be at the start of this tax year. It has not changed now.

For NEXT tax year, 2017-18, it has been calculated differently. My PA increases by £500 to £11,500. My 2017-18 Total Tax-free Allowances are now calculated as:

£11,500 = £11,500 (PA)

Therefore a DECREASE in total tax allowances of £500. AFAIK my PSA for 2017-18 remains £1,000.

For the current tax year Tax Code calculation HMRC simply shows my expected gross interest under Untaxed interest on savings and investments. For next tax year, 2017-18, under the same heading the figure shown is this year's figure minus £1,000. Presumably the PSA?

Perhaps this should be on another thread.

[air04]

Xfool,

Yes, I think my conclusion in my previous post was wrong.

Therefore a DECREASE in total tax allowances of £500. AFAIK my PSA for 2017-18 remains £1,000.

For 17-18, the normal personal allowance is £11,500(it increased by £500).. I completely forgot about it.

For the current tax year Tax Code calculation HMRC simply shows my expected gross interest under Untaxed interest on savings and investments. For next tax year, 2017-18, under the same heading the figure shown is this year's figure minus £1,000. Presumably the PSA?

So, they reduce the savings income by PSA. It is likely that they will follow a similar process for Higher Rate tax payer, so band will not be used for PSA.

Am I right in my understanding that you are not a higher rate taxpayer(ignore capital gains)for salary/interest/dividend income?

Cheers,
ap

[XFool]

Am I right in my understanding that you are not a higher rate taxpayer(ignore capital gains)for salary/interest/dividend income?

Yes. Certainly on HMRC's current figures.

[hiriskpaul]

And then instead if interest received was X, I added X-PSA to my income for the interest component.

I honestly don't know if it's right or not, and I do need to confirm before the end of the tax year as I don't want to push into the 40% bracket and lose it.

In my particular case this year, I have* £8060 salary, £2000 interest before tax, and the rest dividends. As I want to fine tune the dividends, I believe that I can pay myself £32940 in dividends without losing the PSA.

=43000-8060-2000= £32940

So basically the PSA is irrelevant concerning whether you breach higher rate tax or not.

Any thoughts?

*numbers slightly fictitious

I am fairly certain you cannot simply use X-PSA, although in many cases you will get away with that. In your case the PSA will not be used as your earnings + savings income fits in the personal allowance. I had this confirmed in my HMRC web chat. Your income will be allocated to allowances and bands like this:



This means that you could actually draw another £1,000 in dividends and only pay basic rate tax (7.5%) on those dividends. You will still be classified as a higher rate taxpayer, even though you will not be paying HR tax! If you do this you will only get a PSA of £500, but you will not use the PSA anyway, so it makes no difference to you in this respect. There may be other good reasons not to be classified as a higher rate taxpayer though (losing child allowance or something), so I would check this first. The version of the spreadsheet I have uploaded does not work as above by the way - I will correct it following the feedback I got from the HMRC at some point and upload a new one.

If I were you I would do a web chat and say you expect your income to be (8060, 2000, 33940), say you having difficulties understanding the new system, ask them to estimate what tax you will pay and explain why. From the information I have seen and the web chat I think you should be fine with £33,940 in dividends, but the HMRC consultant could have been wrong, or I could have misunderstood.

p.s. is £8060 sufficient earnings to give you NI credit for the state pension? If not, I would increase it a bit. Must only be a few pounds extra for you to qualify if you don't already.

[hiriskpaul]

XFools is in HR band totally, so he gets £500 PSA. If the PSA used up the band, the Personal Allowance would not be increased by £500, but by £250. Increasing by £500, means he gets a £500*40%=£200 benefit. But, if PSA was using up BR band, they would need to give him only £100 benefit(so increasing personal allowance by £250).

No. This is being misunderstood.

AFAICS nothing (apart from my personal circumstances) has changed this tax year, 2016-17. It is unlikely I can help anyone with their tax calculation for this tax year. Gengulphus offered detailed help on a TMF thread with calculations involving the zero rate saving band and tax bands wrt this tax year, 2016-17.

I am trying to flag up what looks to me like a possible change to the Tax Code calculation in the next tax year, 2017-18, which may effect some people here. Though, AFAICS it will not effect me. I don't really know if the change is significant or exactly what effect it could have.

This year, on HMRC figures I an a BR taxpayer. My PA is £11,000. My PSA is £1000.
My 2016-17 Total Tax-free Allowances are calculated as:

£11,000 + £1,000 = £12,000 (PA + PSA)

That is how it was calculated to be at the start of this tax year. It has not changed now.

For NEXT tax year, 2017-18, it has been calculated differently. My PA increases by £500 to £11,500. My 2017-18 Total Tax-free Allowances are now calculated as:

£11,500 = £11,500 (PA)

Therefore a DECREASE in total tax allowances of £500. AFAIK my PSA for 2017-18 remains £1,000.

For the current tax year Tax Code calculation HMRC simply shows my expected gross interest under Untaxed interest on savings and investments. For next tax year, 2017-18, under the same heading the figure shown is this year's figure minus £1,000. Presumably the PSA?

Perhaps this should be on another thread.

Utterly bizarre. The only thing I can think of is that they are no longer including the PSA in the calculation of your code. I pay no attention whatsoever to any PAYE codes I am issued with, so don't really know much about them. I just sort it all out in self assessment. Despite my best efforts, I usually owe tax.

[hiriskpaul]

Utterly bizarre. The only thing I can think of is that they are no longer including the PSA in the calculation of your code. I pay no attention whatsoever to any PAYE codes I am issued with, so don't really know much about them. I just sort it all out in self assessment. Despite my best efforts, I usually owe tax.

One possibility though is that taking off £1,000 PSA will, for most people, mean that too little tax is paid on earned income and will push more people into self assessment. Provided someone earns more than £11,500 next year, it is likely to be preferable from their point of view not to take off the PSA. If they think you will be a basic rate taxpayer and earn less than £1000 in interest, it seems to me that they would be better to ignore the PSA with respect to your tax code. Your 2016/17 code could have been a mistake and you may owe tax on earnings.

[paulnumbers]

And then instead if interest received was X, I added X-PSA to my income for the interest component.

I honestly don't know if it's right or not, and I do need to confirm before the end of the tax year as I don't want to push into the 40% bracket and lose it.

In my particular case this year, I have* £8060 salary, £2000 interest before tax, and the rest dividends. As I want to fine tune the dividends, I believe that I can pay myself £32940 in dividends without losing the PSA.

=43000-8060-2000= £32940

So basically the PSA is irrelevant concerning whether you breach higher rate tax or not.

Any thoughts?

*numbers slightly fictitious

I am fairly certain you cannot simply use X-PSA, although in many cases you will get away with that. In your case the PSA will not be used as your earnings + savings income fits in the personal allowance. I had this confirmed in my HMRC web chat. Your income will be allocated to allowances and bands like this:



This means that you could actually draw another £1,000 in dividends and only pay basic rate tax (7.5%) on those dividends. You will still be classified as a higher rate taxpayer, even though you will not be paying HR tax! If you do this you will only get a PSA of £500, but you will not use the PSA anyway, so it makes no difference to you in this respect. There may be other good reasons not to be classified as a higher rate taxpayer though (losing child allowance or something), so I would check this first. The version of the spreadsheet I have uploaded does not work as above by the way - I will correct it following the feedback I got from the HMRC at some point and upload a new one.

If I were you I would do a web chat and say you expect your income to be (8060, 2000, 33940), say you having difficulties understanding the new system, ask them to estimate what tax you will pay and explain why. From the information I have seen and the web chat I think you should be fine with £33,940 in dividends, but the HMRC consultant could have been wrong, or I could have misunderstood.

p.s. is £8060 sufficient earnings to give you NI credit for the state pension? If not, I would increase it a bit. Must only be a few pounds extra for you to qualify if you don't already.

Thanks for the comprehensive reply. What a minefield! I will do as you suggest and speak to HMRC.

I was fairly sure £8060 qualified as a pension year bit I'll double check. As I understood it was as high as you could go without generating an NI tax liabilty whilst still being a qualifying year. Not sure what the lower level was.

Best,
Paul

[hiriskpaul]

And then instead if interest received was X, I added X-PSA to my income for the interest component.

I honestly don't know if it's right or not, and I do need to confirm before the end of the tax year as I don't want to push into the 40% bracket and lose it.

In my particular case this year, I have* £8060 salary, £2000 interest before tax, and the rest dividends. As I want to fine tune the dividends, I believe that I can pay myself £32940 in dividends without losing the PSA.

=43000-8060-2000= £32940

So basically the PSA is irrelevant concerning whether you breach higher rate tax or not.

Any thoughts?

*numbers slightly fictitious

I am fairly certain you cannot simply use X-PSA, although in many cases you will get away with that. In your case the PSA will not be used as your earnings + savings income fits in the personal allowance. I had this confirmed in my HMRC web chat. Your income will be allocated to allowances and bands like this:



This means that you could actually draw another £1,000 in dividends and only pay basic rate tax (7.5%) on those dividends. You will still be classified as a higher rate taxpayer, even though you will not be paying HR tax! If you do this you will only get a PSA of £500, but you will not use the PSA anyway, so it makes no difference to you in this respect. There may be other good reasons not to be classified as a higher rate taxpayer though (losing child allowance or something), so I would check this first. The version of the spreadsheet I have uploaded does not work as above by the way - I will correct it following the feedback I got from the HMRC at some point and upload a new one.

If I were you I would do a web chat and say you expect your income to be (8060, 2000, 33940), say you having difficulties understanding the new system, ask them to estimate what tax you will pay and explain why. From the information I have seen and the web chat I think you should be fine with £33,940 in dividends, but the HMRC consultant could have been wrong, or I could have misunderstood.

p.s. is £8060 sufficient earnings to give you NI credit for the state pension? If not, I would increase it a bit. Must only be a few pounds extra for you to qualify if you don't already.

Thanks for the comprehensive reply. What a minefield! I will do as you suggest and speak to HMRC.

I was fairly sure £8060 qualified as a pension year bit I'll double check. As I understood it was as high as you could go without generating an NI tax liabilty whilst still being a qualifying year. Not sure what the lower level was.

Best,
Paul

Sorry Paul, I think I was wrong about you being able to take an extra £1,000 in dividends without paying higher rate tax. You were right, the maximum dividend amount is £32,940 I still think I am right about the PSA though - you will not benefit from it as you have no savings income outside the personal allowance. If you could use the PSA and do an X-£500 at the start, then you would be able to add another £500 in dividends and not pay HR tax on those dividends. So worthwhile confirming with HMRC.

[hiriskpaul]

My best guess at the allocation of tax to bands:



It may seem a little odd that you get to use the entire £5,000 Dividend Allowance as you also have £940 allocated to the Personal Allowance, but that is how it works according to the factsheet (example 3)

https://www.gov.uk/government/publicati ... -factsheet

“I have a non-dividend income of £6,500, and a dividend income of £12,000 from shares outside of an ISA”

With a Personal Allowance of £11,000, £4,500 of the dividends are under the threshold for tax. A further £5,000 comes within the Dividend Allowance, leaving tax to pay at Basic Rate (7.5%) on £2,500.

[paulnumbers]

Sorry Paul, I think I was wrong about you being able to take an extra £1,000 in dividends without paying higher rate tax. You were right, the maximum dividend amount is £32,940 I still think I am right about the PSA though - you will not benefit from it as you have no savings income outside the personal allowance. If you could use the PSA and do an X-£500 at the start, then you would be able to add another £500 in dividends and not pay HR tax on those dividends. So worthwhile confirming with HMRC.

Hi Paul,

Thanks very much for coming back again.

I've actually just asked my accountant this morning for guidance, and even they tell me it's too complicated to give generic advice nowadays.

Would you consider putting up your spreadsheet on a website? It seems like something that with a bit of thought could benefit from a sort of open source updating, if you know what I mean. Perhaps it could go on a website, with suggestions for updates incorporated. It's bizarre that the accounting industry don't some how jointly do this, although perhaps it's not in their individual interests.

Paul

[hiriskpaul]

Sorry Paul, I think I was wrong about you being able to take an extra £1,000 in dividends without paying higher rate tax. You were right, the maximum dividend amount is £32,940 I still think I am right about the PSA though - you will not benefit from it as you have no savings income outside the personal allowance. If you could use the PSA and do an X-£500 at the start, then you would be able to add another £500 in dividends and not pay HR tax on those dividends. So worthwhile confirming with HMRC.

Hi Paul,

Thanks very much for coming back again.

I've actually just asked my accountant this morning for guidance, and even they tell me it's too complicated to give generic advice nowadays.

Would you consider putting up your spreadsheet on a website? It seems like something that with a bit of thought could benefit from a sort of open source updating, if you know what I mean. Perhaps it could go on a website, with suggestions for updates incorporated. It's bizarre that the accounting industry don't some how jointly do this, although perhaps it's not in their individual interests.

Paul

Not too surprised at your accountant's response, I think this is fairly typical. You need a tax adviser to help with this sort of thing. At least until the new system is fully understood and properly documented.

I have just had one more attempt at a web chat with HMRC. Thankfully I got someone different. I asked how the tax should be worked out for £15,000 earnings, £2,000 savings and £30,000 dividends. I said I thought it should be £11,000 to personal allowance, £1,000 in the starting rate band, £500 in Personal Savings allowance, £500 savings in the basic rate band, £5,000 in Dividend Allowance, £21,000 Dividends at basic rate and £4,000 dividends at higher rate. The first calculation she came up with was total nonsense, so not off to a good start. I suspect that most inquiries are still about last years tax, so they have to mentally switch when someone asks them about this year. Eventually, after some discussion and I think consultation with an expert, she agreed my calculation was correct. I then challenged her by saying if this years personal allowance was £11,500 and there was no PSA, I would only be liable to higher rate tax on £3,500 of the dividends instead of £4,000. She agreed that this was an anomaly of the way the PSA works - it does not reduce overall taxable income, unlike the personal allowance.

I hesitate to necessarily believe the last person I have spoken to at the HMRC, but I think this does seem reasonable and I believe it is consistent with all the HMRC factsheets. Essentially then my original spreadsheet was probably correct, or at least closer to being correct. I will check it, tidy it up and upload it to Google again. If you want to download it, change it and upload to some other website, be my guest. At the moment it definitely does not cover every aspect though, such as blind persons allowance, marriage allowances, capital gains tax, etc. It would be a lot of effort to bring everything in and I don't think my knowledge of the tax system or excel skills would be up to the job. I don't relish the thought of improving either!

[paulnumbers]

Sorry Paul, I think I was wrong about you being able to take an extra £1,000 in dividends without paying higher rate tax. You were right, the maximum dividend amount is £32,940 I still think I am right about the PSA though - you will not benefit from it as you have no savings income outside the personal allowance. If you could use the PSA and do an X-£500 at the start, then you would be able to add another £500 in dividends and not pay HR tax on those dividends. So worthwhile confirming with HMRC.

Hi Paul,

Thanks very much for coming back again.

I've actually just asked my accountant this morning for guidance, and even they tell me it's too complicated to give generic advice nowadays.

Would you consider putting up your spreadsheet on a website? It seems like something that with a bit of thought could benefit from a sort of open source updating, if you know what I mean. Perhaps it could go on a website, with suggestions for updates incorporated. It's bizarre that the accounting industry don't some how jointly do this, although perhaps it's not in their individual interests.

Paul

Not too surprised at your accountant's response, I think this is fairly typical. You need a tax adviser to help with this sort of thing. At least until the new system is fully understood and properly documented.

I have just had one more attempt at a web chat with HMRC. Thankfully I got someone different. I asked how the tax should be worked out for £15,000 earnings, £2,000 savings and £30,000 dividends. I said I thought it should be £11,000 to personal allowance, £1,000 in the starting rate band, £500 in Personal Savings allowance, £500 savings in the basic rate band, £5,000 in Dividend Allowance, £21,000 Dividends at basic rate and £4,000 dividends at higher rate. The first calculation she came up with was total nonsense, so not off to a good start. I suspect that most inquiries are still about last years tax, so they have to mentally switch when someone asks them about this year. Eventually, after some discussion and I think consultation with an expert, she agreed my calculation was correct. I then challenged her by saying if this years personal allowance was £11,500 and there was no PSA, I would only be liable to higher rate tax on £3,500 of the dividends instead of £4,000. She agreed that this was an anomaly of the way the PSA works - it does not reduce overall taxable income, unlike the personal allowance.

I hesitate to necessarily believe the last person I have spoken to at the HMRC, but I think this does seem reasonable and I believe it is consistent with all the HMRC factsheets. Essentially then my original spreadsheet was probably correct, or at least closer to being correct. I will check it, tidy it up and upload it to Google again. If you want to download it, change it and upload to some other website, be my guest. At the moment it definitely does not cover every aspect though, such as blind persons allowance, marriage allowances, capital gains tax, etc. It would be a lot of effort to bring everything in and I don't think my knowledge of the tax system or excel skills would be up to the job. I don't relish the thought of improving either!

Hi Paul,

I'm probably getting a little ahead of myself with some grand idea of a community sourced spreadsheet. In reality I will make a decision on this soon, pay myself the appropriate final dividend, fill out my self-assesment form on around the 10th April, and then promptly forget everything I learned for 10 months!

Does the following make sense :-

Because of the order that different incomes are taxed at, in my case...

1) Salary
2) Interest
3) Dividends

and because my salary and interest fit within the personal allowance, the PSA is completely redundant?

I appreciate your comments.

Paul

[hiriskpaul]

Hi Paul,

I'm probably getting a little ahead of myself with some grand idea of a community sourced spreadsheet. In reality I will make a decision on this soon, pay myself the appropriate final dividend, fill out my self-assesment form on around the 10th April, and then promptly forget everything I learned for 10 months!

Does the following make sense :-

Because of the order that different incomes are taxed at, in my case...

1) Salary
2) Interest
3) Dividends

and because my salary and interest fit within the personal allowance, the PSA is completely redundant?

I appreciate your comments.

Paul

Yes. If you keep adjusted net income less than 43,001, you get given a PSA of £1,000, but you cannot use it for the reason you state. Greater than or equal to 43,001 and you get a PSA of £500, which you still cannot use. At least that is my conclusion following this morning's web chat and the other HMRC documents. I am 99% certain this is correct. 1% chance that what I was told was wrong (or I have missed some subtlety) and you can take another £500 in dividends without paying higher rate tax.

[hiriskpaul]

New version of my spreadsheet available here:

https://drive.google.com/open?id=0Bwpa1 ... EpUemQyS2s

I have taken down the older ones.

[paulnumbers]

Yes. If you keep adjusted net income less than 43,001, you get given a PSA of £1,000, but you cannot use it for the reason you state. Greater than or equal to 43,001 and you get a PSA of £500, which you still cannot use. At least that is my conclusion following this morning's web chat and the other HMRC documents. I am 99% certain this is correct. 1% chance that what I was told was wrong (or I have missed some subtlety) and you can take another £500 in dividends without paying higher rate tax.

Thanks Paul - if I could send you a beer I would. Alas, I can't even give you a rec.

Paul

[GPhelan]

Folks,
An interesting debate. I also use the SA2000 Self Assessment spreadsheet, but unlike you have no interest in doing the sums in advance.

HMRC do publish a Savings and Investment manual: https://www.gov.uk/hmrc-internal-manual ... ent-manual
Alas a quick scan and search did not uncover anything much about the PSA, but the manual is a maze of cross references and is written for insider not public use.

At the end is a link to some other HMRC manuals: https://www.gov.uk/hmrc-internal-manual ... /saim20000
That list seems to be income tax specific. The full(?) HMRC manuals catalogue is here: https://www.gov.uk/government/collections/hmrc-manuals

Best of luck!