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    • Yorkshire Traveller
    • By Yorkshire Traveller 8th Oct 17, 10:08 AM
    • 249Posts
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    Yorkshire Traveller
    Declaring Tax on Savings
    • #1
    • 8th Oct 17, 10:08 AM
    Declaring Tax on Savings 8th Oct 17 at 10:08 AM
    Since the introduction of the £1000 tax free savings allowance any interest that I've received on my accounts has had no tax deducted at source. I know that I now need to report this interest to HMRC and pay the appropriate tax. I was sort of expecting to receive a reminder from HMRC to do this (for the 2016-17 tax year) but I guess this is not the case, so I'm going to give HMRC a call next week.

    I have a spreadsheet of all my interest payments received, and will report the amount due accurately. However, as that the banks no longer report the interest paid to HMRC (or do they?) how will HMRC know that the interest that I am declaring is correct?

Page 1
    • 00ec25
    • By 00ec25 8th Oct 17, 10:37 AM
    • 5,028 Posts
    • 4,381 Thanks
    00ec25
    • #2
    • 8th Oct 17, 10:37 AM
    • #2
    • 8th Oct 17, 10:37 AM
    However, as that the banks no longer report the interest paid to HMRC (or do they?) how will HMRC know that the interest that I am declaring is correct?
    Originally posted by Yorkshire Traveller
    the UK tax system works on the basis that everyone is honest and follows the self assessment process to the letter

    that is why, if you are selected for a random check, the book will be thrown at you if you are found to have made false declarations when HMRC do take the time to match your figures against independent sources

    it is rather like HMRC staking its all on the favourite for the Grand National, sometimes it wins and they celebrate in a blaze of publicity and fines
    • xylophone
    • By xylophone 8th Oct 17, 11:14 AM
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    xylophone
    • #3
    • 8th Oct 17, 11:14 AM
    • #3
    • 8th Oct 17, 11:14 AM
    http://www.taxvol.org.uk/download/HMRCs-guide-to-the-Personal-Savings-Allowance.pdf

    One assumes that there was no communication last autumn........

    Every taxpayer already has access to their own secure digital
    tax account, like an online bank account, that enables them
    to interact with us digitally. More services are being added
    each month, and we’re introducing simpler ways for people
    to pay any tax they owe, removing the need for millions of
    people to complete a tax return.
    Taxpayers can already see an overview of their taxes through
    their digital tax accounts, enabling them to check that their
    details are complete and correct, and to report changes.


    Have you accessed your personal tax account?

    https://www.gov.uk/personal-tax-account
    • Yorkshire Traveller
    • By Yorkshire Traveller 8th Oct 17, 11:33 AM
    • 249 Posts
    • 78 Thanks
    Yorkshire Traveller
    • #4
    • 8th Oct 17, 11:33 AM
    • #4
    • 8th Oct 17, 11:33 AM
    xylophone:

    Many thanks for this really helpful. I didn't receive any comunications from HMRC last Autumn.

    I have accessed my Personal Tax Account as I have a Government Gateway ID from when I used to do my Self Assesments before I retired 10 years ago.

    I am given the option to make a payment - but how will they know what this is for? Do I need to follow up with a phone call to explain?
    • Dazed and confused
    • By Dazed and confused 8th Oct 17, 12:06 PM
    • 1,769 Posts
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    Dazed and confused
    • #5
    • 8th Oct 17, 12:06 PM
    • #5
    • 8th Oct 17, 12:06 PM
    Until you tell HMRC your interest and they send you a calculation/bill what would you actually be paying?
    • Yorkshire Traveller
    • By Yorkshire Traveller 8th Oct 17, 12:09 PM
    • 249 Posts
    • 78 Thanks
    Yorkshire Traveller
    • #6
    • 8th Oct 17, 12:09 PM
    • #6
    • 8th Oct 17, 12:09 PM
    Until you tell HMRC your interest and they send you a calculation/bill what would you actually be paying?
    Originally posted by Dazed and confused
    I would pay tax at 20% on total interest received less £1000 savings allowance.
    • xylophone
    • By xylophone 8th Oct 17, 12:10 PM
    • 23,129 Posts
    • 13,406 Thanks
    xylophone
    • #7
    • 8th Oct 17, 12:10 PM
    • #7
    • 8th Oct 17, 12:10 PM
    https://www.gov.uk/government/publications/personal-savings-allowance-factsheet/personal-savings-allowance

    You don’t need to do anything to claim your Personal Savings Allowance.

    If you’re a basic rate taxpayer and have savings income or interest of more than £1,000 (£500 for higher rate taxpayers), you’ll have to pay some tax on this. But you don’t need to do anything yet.

    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.


    If you fill in a Self Assessment tax return you should carry on doing this as normal.


    The above (like the previous link) is dated last year.

    See also

    https://www.moneysavingexpert.com/savings/personal-savings-allowance

    How will I pay savings tax if I owe it?

    HM Revenue & Customs has confirmed that any tax owing will be paid through changes to your tax code. So you'll get a lower personal allowance for income tax to pay any tax due on savings interest. Those who self-assess will continue to pay through that system (though a new digital system is replacing the annual tax return).

    Your bank or building society will pay all savings interest due to you gross (without tax taken off the amount).

    When will my tax code change?

    Piles of coins with tax lettering on topHMRC has now finished sending out 2017/18 tax codes. Some will have seen their tax code is lower than the standard 1150L, as HMRC already expects they will earn more in savings interest than their personal savings allowance covers.

    If this has happened to you, and you won't earn more than £1,000 in savings interest (£500 for higher-rate taxpayers), contact HMRC as they will need to adjust your 2017/18 tax code to be correct. You can call it on 0300 200 3300 or use its 2017/18 tax-code query form.


    You have checked your personal tax account and it would appear that no adjustments have been made.

    You might wish to telephone HMRC - try shortly before 8am.
    • Yorkshire Traveller
    • By Yorkshire Traveller 8th Oct 17, 12:12 PM
    • 249 Posts
    • 78 Thanks
    Yorkshire Traveller
    • #8
    • 8th Oct 17, 12:12 PM
    • #8
    • 8th Oct 17, 12:12 PM
    Thanks xylophone - will give HMRC a call tomorrow. Think I'd rather pay the tax due rather than have my tax code adjusted.
    • Dazed and confused
    • By Dazed and confused 8th Oct 17, 12:18 PM
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    Dazed and confused
    • #9
    • 8th Oct 17, 12:18 PM
    • #9
    • 8th Oct 17, 12:18 PM
    I would pay tax at 20% on total interest received less £1000 savings allowance.

    It isn't always that simple, for some there will be additional tax to pay even when within the 0% tax rate.

    This is because it isn't an "allowance". So for example there are a few situations where income within the "allowance" gives rise to an effective tax rate of 10%. And income over the allowance can give an effective tax rate of more than 20%.

    May well not affect you but it will for plenty of people.

    And some lower earners may not even be able to benefit from the £1,000 PSA rate because they get the other 0% tax rate although that doesn't cost more in tax :-)
    • Yorkshire Traveller
    • By Yorkshire Traveller 8th Oct 17, 12:25 PM
    • 249 Posts
    • 78 Thanks
    Yorkshire Traveller
    I would pay tax at 20% on total interest received less £1000 savings allowance.

    It isn't always that simple, for some there will be additional tax to pay even when within the 0% tax rate.

    This is because it isn't an "allowance". So for example there are a few situations where income within the "allowance" gives rise to an effective tax rate of 10%. And income over the allowance can give an effective tax rate of more than 20%.

    May well not affect you but it will for plenty of people.

    And some lower earners may not even be able to benefit from the £1,000 PSA rate because they get the other 0% tax rate although that doesn't cost more in tax :-)
    Originally posted by Dazed and confused
    I agree for others it may not be straighforward, but for me it is!
    • Yorkshire Traveller
    • By Yorkshire Traveller 9th Oct 17, 8:39 AM
    • 249 Posts
    • 78 Thanks
    Yorkshire Traveller
    Well I phoned HMRC this morning - charming helpful lady. We had a good discussion on how the new system just isn't working and that other callers had said the same! (Why not let the banks continue to deduct interest and then reclaim the tax paid on the £1000, or have a mini on-line self assesment form purely for declaring savings interest?).

    I had the option to pay the tax owing by having my tax code adjusted for the current tax year or pay in a lump sum.

    All sorted thanks to everyone for their help and advice.
    • Keep pedalling
    • By Keep pedalling 9th Oct 17, 9:21 AM
    • 3,755 Posts
    • 4,021 Thanks
    Keep pedalling
    Well I phoned HMRC this morning - charming helpful lady. We had a good discussion on how the new system just isn't working and that other callers had said the same! (Why not let the banks continue to deduct interest and then reclaim the tax paid on the £1000, or have a mini on-line self assesment form purely for declaring savings interest?).

    I had the option to pay the tax owing by having my tax code adjusted for the current tax year or pay in a lump sum.

    All sorted thanks to everyone for their help and advice.
    Originally posted by Yorkshire Traveller
    Either of those solutions would leave a lot of people paying tax on their savings and most of them will be receiving less than their £1000 allowance, and never claiming it back. Even now many people are not aware of this allowance especially amoung the elderly.
    • Yorkshire Traveller
    • By Yorkshire Traveller 9th Oct 17, 9:30 AM
    • 249 Posts
    • 78 Thanks
    Yorkshire Traveller
    Either of those solutions would leave a lot of people paying tax on their savings and most of them will be receiving less than their £1000 allowance, and never claiming it back. Even now many people are not aware of this allowance especially amoung the elderly.
    Originally posted by Keep pedalling
    Yes I see your point. I do also think that the Government will be losing out on revenue if people do not declare their savings interest (the HMRC lady agreed with this!). Despite what has been stated (see above) none of the interest of my eight diffferent savings accounts had been declared to HMRC by my savings providers (and one of those is the Government run NS&I). Just shows how unweildy our tax regime is. I guess there's no easy solution.
    • 00ec25
    • By 00ec25 9th Oct 17, 2:04 PM
    • 5,028 Posts
    • 4,381 Thanks
    00ec25
    Yes I see your point. I do also think that the Government will be losing out on revenue if people do not declare their savings interest (the HMRC lady agreed with this!). Despite what has been stated (see above) none of the interest of my eight diffferent savings accounts had been declared to HMRC by my savings providers (and one of those is the Government run NS&I). Just shows how unweildy our tax regime is. I guess there's no easy solution.
    Originally posted by Yorkshire Traveller
    the govt has always been losing revenue from savings

    just go back to the introduction of self assessment and see how few higher rate taxpayers within PAYE were made to do tax returns, yet I know of dozens of such high earners who have substantial savings they "we did not realise" we had to pay extra tax on so have never declared them
    • Dazed and confused
    • By Dazed and confused 9th Oct 17, 8:40 PM
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    Dazed and confused
    I had the option to pay the tax owing by having my tax code adjusted for the current tax year or pay in a lump sum.


    Think something got lost in translation.

    Tax owed for 2016:17 (your op refers) would never start to be collected from this year's tax code half way through the tax year.

    You need a calculation for last year and the tax owed for 2016:17 would then be collected either through your 2018:19 tax code i.e. from 6 April 2018 to 5 April 2019. Or you could make a payment direct to HMRC.

    This years tax code (2017:18) could be adjusted to collect the tax due for this tax year, 2017:18, but not any tax owed for 2016:17.

    You may want to clarify with HMRC exactly what they are going to do as something doesn't seem correct based in your update from earlier today.
    Last edited by Dazed and confused; 09-10-2017 at 8:43 PM.
    • Yorkshire Traveller
    • By Yorkshire Traveller 9th Oct 17, 8:52 PM
    • 249 Posts
    • 78 Thanks
    Yorkshire Traveller
    I had the option to pay the tax owing by having my tax code adjusted for the current tax year or pay in a lump sum.


    Think something got lost in translation.

    Tax owed for 2016:17 (your op refers) would never start to be collected from this year's tax code half way through the tax year.

    You need a calculation for last year and the tax owed for 2016:17 would then be collected either through your 2018:19 tax code i.e. from 6 April 2018 to 5 April 2019. Or you could make a payment direct to HMRC.

    This years tax code (2017:18) could be adjusted to collect the tax due for this tax year, 2017:18, but not any tax owed for 2016:17.

    You may want to clarify with HMRC exactly what they are going to do as something doesn't seem correct based in your update from earlier today.
    Originally posted by Dazed and confused
    Yes I see what you say - I guess I didn't pay attention to the year that the tax code would be adjusted for, but as you say it would be for 2018-19 (so my previous statement that it would be for the current tax year was a mistake) as I prefer to pay in a lump sum.

    Thanks for all you help, advice and clarification - much appreciated.
    • Dazed and confused
    • By Dazed and confused 9th Oct 17, 9:01 PM
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    • 769 Thanks
    Dazed and confused
    The default position is usually to collect it through your tax code but if they are sending you a calculation for 2016:17 now you will have nearly 6 months to pay it before the 2018:19 tax code kicks in.

    If you prefer to keep things neat and tidy you might prefer to pay it by the end of this calendar year so that there is no tax owed to even be included in your 2018:19 tax code (these seem to be issued in January ready for the forthcoming tax year).
    Last edited by Dazed and confused; 09-10-2017 at 9:03 PM.
    • Yorkshire Traveller
    • By Yorkshire Traveller 9th Oct 17, 9:06 PM
    • 249 Posts
    • 78 Thanks
    Yorkshire Traveller
    The default position is usually to collect it through your tax code but if they are sending you a calculation for 2016:17 now you will have nearly 6 months to pay it before the 2018:19 tax code kicks in.

    If you prefer to keep things neat and tidy you might prefer to pay it by the end of this calendar year so that there is no tax owed to even be included in your 2018:19 tax code (these seem to be issued in January ready for the forthcoming tax year).
    Originally posted by Dazed and confused
    Yes - I like things neat and tidy and will pay the bill when it arrives in the next week. Before I retired I did 26 years of Self Assessment and always paid what was due in a lump sum rather than having my tax code changed. It also makes it easier to quickly check that my base tax code is correct.
    • badmemory
    • By badmemory 10th Oct 17, 5:35 PM
    • 812 Posts
    • 792 Thanks
    badmemory
    I have been told that I no longer need to file self assessment (this included for the yr 16-17 which I had already done). I queried this with HMRC naturally. I was told that they will get my state pension direct from DWP and my savings interest direct from the banks & any other pension direct from the provider & they will tell me how much I owe. I will, of course, be checking their figures very carefully.
    • SallySunshine
    • By SallySunshine 10th Oct 17, 7:27 PM
    • 623 Posts
    • 198 Thanks
    SallySunshine
    I told HMRC that my O.H. no longer needs to fill in SA as he had now 2 pensions and rather than claiming savings interest back, he now paid tax through PAYE
    They checked this, agreed, and sent a letter to him to that effect.

    Still keep a close eye on this though!
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