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  • FIRST POST
    • RG2015
    • By RG2015 9th Jul 17, 5:18 PM
    • 457Posts
    • 205Thanks
    RG2015
    Personal Savings Allowance
    • #1
    • 9th Jul 17, 5:18 PM
    Personal Savings Allowance 9th Jul 17 at 5:18 PM
    I have read on this site that banks advise HMRC of annual interest earned on personal accounts. Therefore, if I do not routinely submit a tax return, HMRC will have all of the data to determine if I have an additional tax liability.

    Does anyone here have any personal experience of this?
Page 1
    • Dazed and confused
    • By Dazed and confused 9th Jul 17, 8:48 PM
    • 1,848 Posts
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    Dazed and confused
    • #2
    • 9th Jul 17, 8:48 PM
    • #2
    • 9th Jul 17, 8:48 PM
    I always provide them with my own figures as I need to report other info each year (not via a tax return) so haven't had first hand knowledge but gov.uk has info saying that you can expect to hear between now and October if they think extra tax is due.

    If you have savings interest which doesn't attract an extra tax liability itself but having that extra taxable savings income produces extra liability for some other reason such as reducing married couples allowance or means you are liable for a high income child benefit charge i presume you would be told at the same time.

    https://www.gov.uk/tax-overpayments-and-underpayments
    • RG2015
    • By RG2015 9th Jul 17, 9:19 PM
    • 457 Posts
    • 205 Thanks
    RG2015
    • #3
    • 9th Jul 17, 9:19 PM
    • #3
    • 9th Jul 17, 9:19 PM
    gov.uk has info saying that you can expect to hear between now and October if they think extra tax is due.

    https://www.gov.uk/tax-overpayments-and-underpayments
    Originally posted by Dazed and confused
    Thanks,

    I have followed through on your link and found the following:

    "HMRC will normally collect the tax by changing your tax code. Banks and building societies will give HMRC the information they need to do this."

    This seems quite clear but it must be a major task to collate information for millions of savers. In my case and that of many others they will need to aggregate multiple interest earning accounts. I guess that tax payers ultimately fund this.

    My 2017/18 projection is about £980 and if it varies I'll just transfer some to an ISA to keep below my limit as I do not intend to incur any liability here.
    Last edited by RG2015; 09-07-2017 at 9:24 PM.
    • Dazed and confused
    • By Dazed and confused 9th Jul 17, 9:29 PM
    • 1,848 Posts
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    Dazed and confused
    • #4
    • 9th Jul 17, 9:29 PM
    • #4
    • 9th Jul 17, 9:29 PM
    Are you definitely earning enough to get the benefit of the personal savings allowance, lower earners and very high earners don't get it so the need to keep savings interest less than £1000 may not really be necessary?

    Is your salary/pension more than £16500?
    • RG2015
    • By RG2015 9th Jul 17, 9:43 PM
    • 457 Posts
    • 205 Thanks
    RG2015
    • #5
    • 9th Jul 17, 9:43 PM
    • #5
    • 9th Jul 17, 9:43 PM
    Are you definitely earning enough to get the benefit of the personal savings allowance, lower earners and very high earners don't get it so the need to keep savings interest less than £1000 may not really be necessary?

    Is your salary/pension more than £16500?
    Originally posted by Dazed and confused
    Thanks for your reply and the answer to both of your questions is yes. My wife has lots of unused tax allowance so every so often she gets a windfall. But there are limits you know.
    • Dazed and confused
    • By Dazed and confused 9th Jul 17, 9:47 PM
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    Dazed and confused
    • #6
    • 9th Jul 17, 9:47 PM
    • #6
    • 9th Jul 17, 9:47 PM
    So your wife could potentially get at least £6,000 interest this year without any tax to pay even without taking account of any unused allowances.

    Have you persuaded her to apply for the Marriage Allowance in return for one of the windfalls you put her way??
    Last edited by Dazed and confused; 09-07-2017 at 10:02 PM. Reason: £6,500 corrected to £6,000
    • RG2015
    • By RG2015 9th Jul 17, 10:01 PM
    • 457 Posts
    • 205 Thanks
    RG2015
    • #7
    • 9th Jul 17, 10:01 PM
    • #7
    • 9th Jul 17, 10:01 PM
    1) £6,500 interest is £650,000 at 1% or at a stretch £325k at 2% - I wish!
    2) Marriage allowance done on day 1 but it still irks me that 90% (less a small amount on interest received) of her personal allowance is effectively wasted.

    Next stop IHT planning although the latest changes should see us safe.
    • Dazed and confused
    • By Dazed and confused 9th Jul 17, 10:05 PM
    • 1,848 Posts
    • 814 Thanks
    Dazed and confused
    • #8
    • 9th Jul 17, 10:05 PM
    • #8
    • 9th Jul 17, 10:05 PM
    Well it's worse really because if the law allowed it and she gave you the whole of her personal allowance she would then be taxed in full on the savings interest but the tax rate on that (for the first £6,000 at least in that situation) is currently 0% so no tax to actually pay!
    • RG2015
    • By RG2015 9th Jul 17, 10:42 PM
    • 457 Posts
    • 205 Thanks
    RG2015
    • #9
    • 9th Jul 17, 10:42 PM
    • #9
    • 9th Jul 17, 10:42 PM
    Thanks for your help, D&C. I sometimes pursue an academic interest in life topics just to make sure I'm not a victim of my own ignorance.
    • RG2015
    • By RG2015 10th Jul 17, 8:09 AM
    • 457 Posts
    • 205 Thanks
    RG2015
    I have researched this issue further and it was reported in 2015 by the Telegraph that HMRC is using software called Connect to match data about our finances. They quote the following.

    "Banks and other financial firms report to HMRC the interest paid to individuals across scores of millions of accounts, and this data is fed into Connect. The main object is to spot undeclared, taxable savings income."
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