How do you avoid higher rate tax on savings interest

LongTermLurker

KiKi wrote: »

If all you do is get paid by your work, open a savings account and stick your money in there, how would you know to do that? I wonder if perhaps I missed something along the way?!

In a word - P60:
Bottom right hand corner, in bold

By law you are required to tell HM Revenue & Customs about any income that is not fully taxed, even if you are not sent a tax return

However, I agree, it's a minefield. My take home pay varies and I'm sure I must be in the High Rate band, but no other setup would put so much responsibility on a layman. It's like a doctor expecting you to know the symptoms of a stroke (or whatever) and how to combat them - I'm sure it's obvious to someone who works in that particular line. I also count myself as being finance-literate, and can understand pensions and investments, but the tax situation stumps me at times.

KiKi

Ah - the P60! I confess to not having seen that part of it. Fair enough.

But yes, I agree - you don't know what you don't know. It's one thing not reading T&Cs...that's just irresponsible. But it's another if you're not told. However, I confess to not reading my P60 in that way, so I shall be corrected and make sure I do something about it this year.

Rats.

Thanks again, all.
KiKi

barak

KiKi wrote: »

.....However, I confess to not reading my P60 in that way, so I shall be corrected and make sure I do something about it this year.....

If by any chance you already owe tax from undeclared savings for 2006/2007 or any previous year when you were a higher rate tax payer, I would get in touch with your tax office immediately.

The sooner they are made aware the better - they would probably prefer to hear it from you now rather than finding out later.

KiKi

Thanks Barak, I will do just that next week.

Out of interest, how do they *know* that you have savings on which you haven't paid tax on the interest? How would they look it up, or find out? As it's not NI linked, people must be able to say they have earned *any* amount of interest and they wouldn't know the difference? Or do you have to say which institutions you have savings with, and they do spot checks on it or something?

Just curious!

Thanks for the advice.
KiKi

ipri

Hi...soon to retire...will get about £43K ish / year...superannuation...I presume that there is no way I can get this under 40% threshold?? Ian

jem16

KiKi wrote: »

Thanks Barak, I will do just that next week.

Out of interest, how do they *know* that you have savings on which you haven't paid tax on the interest? How would they look it up, or find out? As it's not NI linked, people must be able to say they have earned *any* amount of interest and they wouldn't know the difference? Or do you have to say which institutions you have savings with, and they do spot checks on it or something?

Just curious!

Thanks for the advice.
KiKi

The banks do notify HMRC about accounts where tax is being taken. Don't know how long it would be before they catch up with you though.

Mikeyorks

LongTermLurker wrote: »

Mike, can you define what you mean by "simple"?

Sorry, I'd missed that.

It's an HMRC phrase ..... and I'm afraid they don't really define it. I could say 'not complex' .... but suspect we both know that.

I think it's for cases where the earnings are clearly defined under PAYE, there's the possibility of savings interest but no P11D data? They threw me out of SA several years ago because I was 'simple' ! ..... and I fit that definition.