Interest from savings in higher rate tax band - how do they know?

nzseries1

Hi,

I pay higher rate tax because of my income, however my income is below the threshold whereby I have to fill in a self-assessment tax form. The bank takes 20% off my interest from my savings as tax. I kind of wonder whether they should be taking 40%.

My question is, how do HMRC know about your interest from your savings? I mean, I've never given my NI number to the banks I have savings with. I assume that you're supposed to mention it on your self-assessment tax form, but according to the rules, I don't have to fill out a self-assessment!

Please note, I'm not trying to avoid tax here, if anything i'm worried that I only pay 20% tax on my interest and they're going to come after me with a tax bill!

Thanks for any help

tom188

It is your legal responsibility to inform HMRC that you have tax to pay. Once you have done this they will most likely send you a self assessment form for you to complete.

The bank will deduct at 20%, and you pay the revenue the remainder directly.

CLAPTON

you need to inform the HMRC that you are receiving saving interest if you pay 40% tax.

Plasticman

Thanks to the OP for this thread. I'm in a similar position, but all of my savings are in an ISA (plus some in my wife's name who is not a tax payer). But I do get interest on my current account (2 or 3 pounds per month) - I guess that I should be contacting the tax office to declare this????

Mikeyorks

All Institutions who pay interest on an account are mandated to provide HMRC with data each year showing how much interest paid / tax deducted / funds in account / name address / R85 filed etc etc. That's collated by HMRC in a data warehouse and they bring together all accounts for individuals .... no matter how diverse the spread of accounts among different Institutions. They don't need the NINO to collate it - they use fuzzy logic to match names / addresses in order to link accounts.

nzseries1 wrote:

My question is, how do HMRC know about your interest from your savings?

barak

nzseries1 wrote: »

.....according to the rules, I don't have to fill out a self-assessment!
..... I'm worried that I only pay 20% tax on my interest and they're going to come after me with a tax bill!

As has been said, you should be completing a self-assessment return. I think you will find it better in the long run if you contact HMRC, rather than the other way round!

nzseries1

Those answers seem perfectly sensible, here's my problem though:

HMRC says you don't need to fill in a self-assessment form if you earn less than £100,000. However you guys are saying that anyone in the 40% tax bracket who earns any interest should fill in the self-assessment.

Here's the thing... "anyone who earns any interest" = "pretty much every single person in the whole country".

So basically, you're saying that anyone who earns in the 40% tax rate should fill out the self-assessment form? I'm just wondering why HMRC would set the lower threshold for income for requiring the form at £100,000.

nzseries1

According to this page:

http://www.hmrc.gov.uk/sa/need-tax-return.htm

I only have to fill it in if I have annual income from savings or investments of £10,000 or more (before tax). My interest is nowhere near that... so is it safe to say I don't need to worry?

Lokolo

Unless they catch you.

cheerfulcat

nzseries1 wrote: »

According to this page:

http://www.hmrc.gov.uk/sa/need-tax-return.htm

I only have to fill it in if I have annual income from savings or investments of £10,000 or more (before tax). My interest is nowhere near that... so is it safe to say I don't need to worry?

No! You may not have to fill in a self-assessment form but you still need to notify HMRC - look here.

nzseries1

cheerfulcat wrote: »

No! You may not have to fill in a self-assessment form but you still need to notify HMRC - look here.

Thanks for the link cheerfulcat, that makes it clear as crystal ... thanks!! :beer: