When savings/investment income requires a tax return

LongTermLurker

Just received a letter from HMRC which clears this up and defines "complex tax affairs"

Employees & Pensioners with complex tax affairs... need to fill in a tax return if you:

• have an annual income of £100,000 or more
• have annual income from savings or investments of £10,000 or more (before tax)
• claim against tax for expenses or professional subscriptions of £2500 or more
• have untaxed income of £2500 or more
• owe tax at the end of the year that cannot be collected through a change to your PAYE tax code for the following year

There are other circumstances, but the key point re savings income appears to be that less than £10k interest (before tax) doesn't, in itself, trigger a requirement to fill in a tax return.

The letter also states "If there are only minor differences in your taxable income since we last sent you a PAYE notice of coding, do not worry; any tax effect would be small."

This might help ease other people's confusion as well as mine.

Oblivion

I'm surprised by the first condition ' have an annual income of £100,000 or more'. I would have thought that the need for a tax return would kick in at a much lower level than that.

Dave.

LongTermLurker

I always thought it was for people who are in the high-rate tax band, but that looks to be a common mis-conception.

The key, as I see it, is PAYE - so long as you're an employee then you can be taxed at source, and so long as the tax you owe is less than your "taxed earned income" then they can manipulate your tax code to ensure your employer deducts the tax you owe on a monthly basis. It's only when the tax figures start getting significant that they want you to document them.

Even if you don't fill in a tax return though, it's your responsibility to tell the tax office if you have untaxed income, so they can then adjust your tax code to suit. However, that statement above indicates that if the extra income is negligable (eg £500 savings = £32.50 interest @ 6.5% = maximum of an extra £6.50 that you would owe) then they may not be bothered - I wouldn't like to guarantee that though!

(The above is only my basic understanding of the statements - I haven't studied tax matters at all)

jem16

I fulfil all the above conditions for not having "complex affairs" and still get asked to complete a full tax return.

LongTermLurker

There are quite a few other times that I didn't include - you're not a Minister of Religion are you?

(they are obviously deemed really dodgy characters, because they always have to fill one in )

Lokolo

Savings and Investments beyon £10,000. Would they include ISAs in that even though they are tax expempt?

debbie42

Lokolo wrote: »

Savings and Investments beyon £10,000. Would they include ISAs in that even though they are tax expempt?

It's income from savings and investments above 10K, not the savings themselves. Any interest from ISAs isn't relevant to a tax return at all.

I used to fill one in when working to claim allowances to pay less tax rather than more. It works both ways!

jackieb

jem16 wrote: »

I fulfil all the above conditions for not having "complex affairs" and still get asked to complete a full tax return.

My husband's always had to fill in a tax return. Twenty years ago he was a share fisherman and classed as self-employed (which he wasn't really). He left the sea almost 20 years ago. He is PAYE and he still has to fill in a tax return. The only thing on that list that applies to him is the expenses of over £2500, and this is the first year that's happened.

Lokolo

Oh yeh! I mis-read woo woo. Thats good.

Bit annoying though, I will earn around £3k this year so looks like I need to fill one in. Just my Dominos job will be a pain getting my P60, so unorganised

LongTermLurker

jackieb wrote: »

The only thing on that list that applies to him is the expenses of over £2500, and this is the first year that's happened.

I think that is if you are claiming tax back on personal expenditure, rather than if you run up an expenses bill for your employer.

eg:

• He is employed, and spends £500pm on hotel bills, which he claims back through his employer's expenses system - this doesn't count
• He is employed, and has to buy his his own equipment which he need to do his job; he wants to claim back 20% tax on the cost of the equipment - if over £2500, he has to complete a tax return
• He is employed, and uses his own car, for which the company pays him 10p per mile. He drives 50,000 miles pa, so the company pays him £5000. HMRC figures allow him £13,100 - he can claim back tax on £8100 = £1620 tax (now I don't know if the £2500 relates to the amount he is claiming tax on, or the amount of tax he is claiming).

It sounds like once they've got you, they'll keep sending you a tax return (unless you ask them not to? If your circumstances change dramatically, it would be in their interest not to waste their time)

jackieb

LongTermLurker wrote: »

I think that is if you are claiming tax back on personal expenditure, rather than if you run up an expenses bill for your employer.

It sounds like once they've got you, they'll keep sending you a tax return (unless you ask them not to? If your circumstances change dramatically, it would be in their interest not to waste their time)

Ah, thanks. Yes, it was expenses run up in the course of his work. It does sound like once they've got their hooks in, they don't let go!