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

napoleon

nzseries1 wrote: »

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

Big Brother society, innit.

Locoblade

Hi all

If you become a higher rate earner during the year, how does that work with regards to tax on savings for that year?

My basic salary is under the 40% threshold but towards the end of last year I started earning quite a bit of overtime which took me over that threshold by year end. During that time up to year ending April 2008 I had a reasonable sum of money sitting in a savings account waiting to pay for a small extension on the side of the house which was only taxed at regular 20% rates, so the question is do I owe tax on this or not, or do I only owe tax on it from April 2008 onwards having now been classified as a higher rate earner? If I owe tax from the point I became a high rate earner, how do they calculate when this was, as the overtime was sporadic so one month I may have paid 40% tax but other months not?

CLAPTON

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, it does NOT say that ONLY people with 10k in saving or more need fill in a tax form... that bit means you MUST fill in a form if your savings are 10k or over even if your total income is less than the 20% tax band

you used to be able to just write a simple letter giving details of the interest... maybe you still can... phone them up and ask..you dont have to give your name etc for a general query.

CLAPTON

Locoblade wrote: »

Hi all

If you become a higher rate earner during the year, how does that work with regards to tax on savings for that year?

My basic salary is under the 40% threshold but towards the end of last year I started earning quite a bit of overtime which took me over that threshold by year end. During that time up to year ending April 2008 I had a reasonable sum of money sitting in a savings account waiting to pay for a small extension on the side of the house which was only taxed at regular 20% rates, so the question is do I owe tax on this or not, or do I only owe tax on it from April 2008 onwards having now been classified as a higher rate earner? If I owe tax from the point I became a high rate earner, how do they calculate when this was, as the overtime was sporadic so one month I may have paid 40% tax but other months not?

tax works on the tax year basis

so if in 2008-2009 your taxable income including earning and gross interest (excluding ISA interest ) exceeds the 20% band then you are liable to the extra tax.
It doesn't matter when in the tax yerar you earned the money


So in tax year 2007-8, if your total taxable income exceeded £39,825 then you owe some extra tax for the savings

Locoblade

Thanks, thats what I feared.

I don't suppose the fact that Im married, my wife is a standard rate tax payer and the savings are half hers would make any difference retrospectively, because we could have legitimately avoided paying this tax by having the savings in her name? The savings are now in her name as I twigged this could be an issue when I got my P60, but I thought it might only affect this year's tax, not last year's too

nzseries1

Locoblade wrote: »

Thanks, thats what I feared.

I don't suppose the fact that Im married, my wife is a standard rate tax payer and the savings are half hers would make any difference retrospectively, because we could have legitimately avoided paying this tax by having the savings in her name? The savings are now in her name as I twigged this could be an issue when I got my P60, but I thought it might only affect this year's tax, not last year's too

Only if it's a joint account. If it's a joint account, then half are yours, and half are hers.

If the savings were in your name when the interest was paid out, then all the "could haves" in the world won't get you out of paying tax on it !

nzseries1

CLAPTON wrote: »

no, it does NOT say that ONLY people with 10k in saving or more need fill in a tax form... that bit means you MUST fill in a form if your savings are 10k or over even if your total income is less than the 20% tax band

Thanks, I realised this after looking at the directgov link above, I guess in retrospect I was a bit naive to think what I did

Locoblade

nzseries1 wrote: »

Only if it's a joint account. If it's a joint account, then half are yours, and half are hers.

If the savings were in your name when the interest was paid out, then all the "could haves" in the world won't get you out of paying tax on it !

Thought not, worth asking though. Bloomin' government get enough of my taxes, the least they could do is let us off paying ones I'm only paying because of an oversight :rolleyes:

Hungerdunger

Locoblade wrote: »

Thought not, worth asking though. Bloomin' government get enough of my taxes, the least they could do is let us off paying ones I'm only paying because of an oversight :rolleyes:

Another way of looking at it is that you are one of a relatively small band of workers who have earned over the 20% tax rate band, and being relatively affluent should be grateful to pay taxes to help out those in need of medical or financial help.

Mikeyorks

If you're PAYE and go into the 40% rate - it's no longer the automatic admittance to the SA Return requirement that it used to be. If your affairs are otherwise 'simple' ...... then all you have to do (but you do have to do it) is advise HMRC. And they will normally d/w your interest via P810 .... which is a simple single page Return specific to PAYE. And any underpayment created by the extra tax due on the interest will (if under £2k) be coded out the following year.
They will then continue to check by issuing a P810 every 2 / 3 years.