I receive interest from a company loan. I am 100% sure that the PSA allowed interest from company loans but this is no longer included. In the types of qualifying interest. Am I mistaken? When was it remived?
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What is your basis for this statement?..... but this is no longer included. In the types of qualifying interest.
This'll be the link then:
https://www.gov.uk/apply-tax-free-interest-on-savings
And your rationale is that if you're not on the list, you're not getting in, presumably?
You are, I'm afraid a victim of a very understandable condition that can cause mayhem, and that is believing what you read on gov.uk.
The only cure is to read what the law actually says, in this case section 18 Income Tax Act 2007 which defines "savings income" in terms that are completely clear to tax professionals.
Savings income actually covers several types of income. The main one is interest. Anything which is interest and not exempt from tax such as in an ISA is savings income and entitled to benefit from the PSA.
Thus what you receive as interest from a company is within the PSA. You will find that if you enter the interest income in the right place in the electronic tax return or the right box on the paper tax return (Box 1 or 2 on TR3) then the PSA will be given.
What gov.uk does not say is that it is giving you examples of the types of income that whoever compiled it thinks is "interest". The fact that it does not say that there are other sources of interest not included in the list is misleading. And as mentioned above (and below) there are lots of things which are not interest which attract the PSA.
Gov.uk also makes some wrong statements which could lead to injustice, unless the HMRC tax calculation does not do what gov.uk says. For example it says that "interest" for the purposes of the PSA includes "interest from ... some life insurance contracts". It is possible that what it is getting at is amounts of interest added to a payout because the insurance company is paying late because of its 0wn fault - this happened to me as trustee of a policy of which my mother was the settlor and premium payer. It is wrong, or at least very misleading, to say though that this is interest "from" a life insurance contract. The reason I think this is what it is getting at is that it also refers to "interest from ... PPI", and here must mean the interest added to what banks and insurers have paid out in compensation.
However the gov.uk page omits all other gains from a life insurance contract which all also fall within the PSA.
It also wrongly refers to "interest from ... life annuity payments". Payments from a "purchased" life annuity are annuity payments, not interest - they are however within the PSA (to an extent, the details of which are irrelevant here).
But my main message is that if you return the interest you receive as interest in your tax return the result will be the right one, unless others know different.
It is section 18(3)(a), "income chargeable under Chapter 2 of Part 4 of ITTOIA 2005 (interest)".
That Chapter starts with s 369 ITTOIA which says "(1) Income tax is charged on interest."
It is Chapter 2 of Part 4. I quoted s 366(1), part of Chapter 2, showing that the Chapter charges "interest", with no other descriptions. What gov.uk is trying to do is to pick out some of, the commonest, types of interest - it is in no sense legislation.
@ richard thomas (your 12.59 post).
I believe The Dullard was simply in his occasionally whimsical mood, given that there is a school of thought (of which he is presumably a student or teacher) that adjectives of two or more syllables should not, in their comparative and superlative forms, adopt “er” and “est” respectively; and hence that his “most common” is correct, but your “commonest” not so:)
Basil.
@OP, I believe you are looking for something that doesn't exist - a statutory definition of interest. What we have instead is case law. HMRC explains in SAIM (a whole section starting at page 2000 but a couple of extracts that might be of interest are:
https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/s...
https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/s...
Btw, accountants are some of the worst people to ask what "interest" means. HMRC knows that interest cannot be backdated (see 2040) - accountants seem not to.
Most of this is irrelevant to you, but one possible point to take is that amounts paid in excess of what might be a commercial rate of interest probably are not interest.
But @Richard, and with respect, I'm not sure reference to s18 is sufficient to answer the OP's question. Some 'allowances' do not apply to income if its source is connected with the recipient of the income.
@All - I'm no grammaticist but "commoner" is definitely a word.
Additional: OP, maybe you miss Richard's main point (that the default position for ALL interest is set out by s18(3)(a) and Chapter 2 of Part 4 of ITTOIA 2005 (interest)). There's not a list of "qualifying interest" per your OP. This is simply how interest - any interest - is taxed unless something else in statute overrules.
I agree with most of this, and would add that if HMRC are able to show that a rate of interest is above a commercial rate, the normal result is that the excess is treated as a distribution and so outside the savings allowance, but within the dividend nil rate (unless I've missed something). In an extreme case it might not be interest at all - see eg Cairns v MacDiarmid, a Rossminster scheme.
But I'm not sure what you mean about connected persons. First I assumed that A as a creditor is not connected to A's nephew's company for any significant tax purpose, even if (which I doubt) they are connected for any tax purpose. Second the question was about the individual savings allowance where as far as I know there is no restriction by reference to any tax connection between creditor and debtor.
As a matter of interest what allowances are affected in the way you state?
I had not intended to sound as if I disagreed with anything you said.
The "personal savings allowance" is up to £1,000. I also am not aware of any restriction by reference to any connection between the person paying interest and the recipient. Use of the word "qualifying" led me to suspect that the OP may have thought that there was such a restriction (and that was the point behind the question). Looking at the OP's subsequent comments, I realise that suspicion may well have been misplaced.
But you ask about other so-called "allowances"; these may be restricted if a connection exists between payer and recipient. The other £1,000 "allowances" that spring to mind are of course the trading allowance and the property allowance. Neither of these applies if there is a relevant connection between payer and recipient. And relevant connection here includes employment - which may be intended to prevent abuse (fair enough) but also catches innocent transactions. Fairy cakes/homemade cards etc an employee sells at work may be covered by the trading allowance. But if the self-employed boss buys one, technically that's a payment by an employer and not covered. (It might be even worse than that - because the exclusion seems to come into play if the income includes a payment made by the employer... so maybe if the employer buys a cake/card, all of the cake/card sales are excluded/none is within the "allowance"?)
@All - I'm no grammaticist but "commoner" is definitely a word.
Indeed, and Jarvis Cocker once wanted to be just like one of them.
I repeat my comment from 18th Apr 2022 13:56, above.
Shallow is a two-syllable adjective and, although 'more shallow' is just about intelligible (depending on the context), the OED has no problem in accepting 'shallower'.
I'm a stickler for correct language and grammar ... even when I'm wrong! :=)
I'm happy with shallower and shallowest too; they sound better than more shallow and most shallow. It wasn't me that brought up the number of syllables. Some words work with -est and -er, but others don't; they just sounds wrong.
Lewis Carrol agreed with me, sufficient to comment on the grammatical propriety of "curioser and curioser".
Most definitely (as I said above).
Definiteliest (as I merely thought).
English is weird (as I've said and thought many times!)
Whilst not being as pedantic on grammar as some, one thing that never fails to rile me these days is the constant mis-use by the media of the word "decimated". It was was originally a Roman word, I believe, and simply meant to flog one in ten soldiers for the transgressions of the entire legion. The 1 in 10 is perfectly obvious from the fact it begins with "dec" as in decimal, so it is absurd for them to talk, for example, about Mariupol being "decimated" when apparently it has been 90% destroyed. If only one person reads this and stops using that daft word, I will be satisfied.
You are perfectly entitled to stick to the practice in your own writing and speech of only ever using the first attested meaning of a word and to overlook the polysemic nature of English, just as you are entitled to use, as you have done, dangling participles or hyphens where one is not currently used, but what I fail too understand is why the use by people of what the OED calls "the most usual sense in standard English" actually riles you.
"decimated" was not a Roman word, or even, to be a touch pedantic, a Latin word (Latin is the name in English for the language the Roman people spoke) - that word was "decimare", and "decimated" was not a participial form of the verb in Latin. And decimare meant to kill one in 10, not flog them (see the OED).
"Decorated" begins with "dec-", and comes from Latin but with no relationship to "decem": it's actually "decim-" in "decimal" that shows the "ten" meaning, to the small part of the population which knows enough Latin to make the connection between "decimated" and "10". It is not "perfectly obvious" that "decimate" means destroy one in ten, despite your silly comment. Note I am using silly in the modern sense, and not in the first (or second etc) recorded sense in the OED, even though you no doubt use it only in the original sense and will become riled by my modern standard usage.
And why only "these days"? The reviled usage has been attested as far back as 1660.
You shoot yourself in the foot at the end. You call "decimated" a "daft" word, by which you obviously mean "mild, gentle, meek, humble" (OED meaning 1.), when in fact, like the media with "decimated", you seem to be using the now standard meaning.
Well I guess that's what they call a stinging rebuke. Richard, it's a good job you weren't a presenter on the TV show Room 101. The guests would have been scared out of their wits. They would have sat in their chairs trembling in fear of your next put-down.
OK, so decimare was the Roman word, not decimate, and they killed 1 in 10 rather than merely flogging them (not sure it would have made much difference with the flagellum). The point is that the root of the word (decim not dec as you point out) attests to its original meaning of 1 in 10.
I do think you're being a tad patronising to say that only a small part of the population would make that connection. Actually, most people know enough about the English language to be aware of Roman roots such as aqua or ante and the extended/continued use of their original meaning in derivative words, such as aquatic and antecedent. The similarity/connection to decimal is there for all to see and it should be stuck with.
As for the polysemic nature of English, I'm not sure that for a word to have several different meanings is really a good thing. After all, the whole point of language is to make yourself clear. I think it's more the other way round actually in that several English words have the same or very close meanings, and that is a good thing, as it allows our language to become more nuanced with subtle shades of meaning chosen carefully to fit the situation.
I don't think decimate really fits that bill. It's not a word used to convey a certain nuanced meaning, although it could have been, used correctly. It's just a buzz word that's come into fashion in the world of journalism over the last 20-30 years. They could just as easily use annihilated, destroyed or obliterated but I suppose decimated trips off the tongue more easily.
Just because people mis-used (sorry misused) it back in 1660 does not make it any less wrong now. However, a quick check on the origins of the word in middle English indicate that it was used to describe the levying of a 10% tax on Royalists by Oliver Cromwell, so at least he got it right.
Yes, language does evolve and words take on new meanings, and that's a good thing too, but some words become skunked terms, meaning they should perhaps be retired as their semantic shift makes them hard to use in either traditional or modern ways. I'd say it's time to consign the word "decimated" to Room 101.
Decimate
I feel the same about the misuse of the word
I only ever hear it used to mean 1 in 10 killed in coversation with humans
I only ever hear it used to mean reduced to a tenth in mainstream media
I honestly thought all people knew the derivation of use from Roman times
Have they stopped teaching Roman history?
Thank you for your measured reply. As you see I can get riled too, and I have no objection to people getting annoyed or riled or upset by language misuse (and I have used that term advisedly as you will see) or anything else.
But I genuinely cannot understand why you and Paul Crowley think that the journalistic use of “decimated” you refer to is “misuse” of the language, ie wrong or incorrect. Who sets the standard or the rules where it is laid down that using “decimated” in the way the media do is wrong or incorrect?
It is not so much that there are two different meanings of “decimate”, but that there is a literal meaning and one or more metaphorical or figurative meanings. Your Oliver Cromwell example is not use of the literal meaning: he taxed people, he did not kill (or even flog) them.
May I gently point out that your suggested alternative “annihilated” is not being used in the literal, Latin-derived sense. As you know, “nihil” is Latin for nothing, so to annihilate is to completely reduce to nothing, not reduce to 90% of what it was. So you were using it figuratively, and no one bats an eyelid (“bat” there is polysemic – I don’t think the verb in that phrase originally referred to cricket).
As I said I have no problem with getting annoyed or upset by usages that do not appeal to me. I have a probably irrational prejudice about “refute” rather than “deny”, or “repulse” as a verb, rather than “repel”, and I wouldn’t personally use them in the sense they are so used though they are widely used, or tell other people they are wrong to or are misusing the language. And I get very annoyed by jargon or obscure acronyms (and abbreviations to comfort the purists) when used outside the group who know what they mean. This is a phenomenon christened (not literally) “nerdview” by one of my heroes, Professor Geoff Pullum, co-author of the Cambridge Grammar of the English Language, a phenomenon which HMRC are guilty of using far too much. Pullum gets a mention in some of the footnotes to my Tribunal decisions, as do other language issues.
I was not intending to be patronising in my remarks about knowledge of the Latin derivation of English words, but I suspect that regular contributors to this site, being tax professionals, are better educated than most people. But even among this group do you think all of them will make the kind of connection you refer to? I would be glad to be shown to be wrong.
We are a long way from the OP’s question now (which has stimulated an excellent relevant discussion), so this will be my last word.
Oliver Cromwell didn't kill people? I think King Charles the 1st might have disagreed with you (or would have done if his lips could still move).
OK, well let's try another word, shall we? One that I'm sure most of us would agree on. I get very riled these days by HMRC's misuse of the word "customer" to describe ordinary taxpayers, when a) they have no right to refuse the transaction or take their "custom" elsewhere, b) they have no choice or say in the so-called service being provided, and c) they don't get anything in return for their money (not from HMRC anyway). It's an abuse of the English language. Any objections there?
Not from me. It's jargon that should be used only in intra-HMRC communications.
I think it dates back to the chairmanship of Sir Nick Montagu who decided that it would be a good idea to convince Gordon Brown that IR and not DHSS should administer tax credits (it wasn't - and of course tax credits are slowly going back to where they belonged, in DWP as UC). He reasoned that we couldn't call all those who deal with us "taxpayers" as we were also "givers", so "customers" was the answer.
I tend not to get riled by the misuse of words or language (otherwise I would have permanently to be riled at myself), but I do find the taking of what has been said out of its context quite annoying - especially when it is done deliberately to misrepresent what was said. That's probably a consequence of my tax training, and the more common instances in this forum are when people (deliberately or otherwise) misinterpret/make no effort to understand statute. But your taking what Richard said out of context is just as annoying.
But I'd rather be annoyed by you than 'liberated' by Putin. Let's agree to be grateful that you have the freedom to discuss Latin word derivations and meanings in here, and not have to face the reality behind the words (whether or not misapplied).
I feel the need to clarify these words:
and the more common instances in this forum are when people (deliberately or otherwise) misinterpret/make no effort to understand statute.
This was in the context of taking sentences out of context. I'm not annoyed when people misinterpret statute (again, I would have permanently to be annoyed at myself if that were so); I'm annoyed when (better example) people take one sentence out of an HMRC Manual and construct a meaning round that sentence in isolation - rather than looking at the context of the sentence and deriving the (usually plain) meaning from that context.
The words I quote, taken in isolation, don't say what I want them to say - and thus provide an example of what I mean. (Is that irony?)
From the Guardian's style guide:
Latin
“Away with him! Away with him! He speaks Latin” (Shakespeare, Henry VI Part 2)
Some people object to, say, the use of “decimate” to mean destroy on the grounds that in ancient Rome it meant to kill every 10th man; some of them are also likely to complain about so-called split infinitives, a prejudice that goes back to 19th-century Latin teachers who argued that as you can’t split infinitives in Latin (they are one word) you shouldn’t separate “to” from the verb in English. Others might even get upset about our alleged misuse of grammatical “case” (including cases such as dative and genitive that no longer exist in English).
As our publications are written in English, rather than Latin, do not worry about any of this even slightly
Not sure it was mere flogging, I understood it could mean killing one in ten "pour encourager les autres"as Voltaire said.
You've not previously mentioned anything about your other earnings.
So before you blithely assume that you "qualify for the £5k + £1k personal savings allowance", it would be sensible to at least have a quick read of the overview at https://www.gov.uk/apply-tax-free-interest-on-savings
After that? Book an appt with your accountant and get some personalised advice.
Agreed OP should see an accountant if this matters for planning and what s/he does depends on the answers.
But if it's a fait accompli and OP just needs to know the tax, then Richard's summary advice above is hard to beat:
But my main message is that if you return the interest you receive as interest in your tax return the result will be the right one...
My (possibly too subtle) point was that, although the thread has been all about the validity of the interest in the context of the £1k Personal Savings Allowance ... OP has suddenly announced an interpretation of qualifying "for the £5k + £1k personal savings allowance".
The £5k Starting Rate for Savings is a different beast, which has dependencies on topics not yet proffered by OP (or others) on the thread.
Hence the suggestion of a little light reading before an assumption takes hold.
Yes, I knew you meant that - hence my reply!
I'd just add... OP may need to start completing tax forms if s/he doesn't already do so.
On a separate but related matter, assuming the loan is for more than 12 months, or capable of exceeding 12 months, I believe the borrowing company will still need to deduct 20% withholding tax from the payment and file a CT61 quarterly, based on interest paid.
Based on others answers, the OP should receive a tax refund after filing a tax return, but will impact on cashflow.