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

comdw

the annoying thing about this is that they expect you to KNOW you are a higher rate tax payer and do something about it. Is it obvious from most peoples payslip that they are a higher rate tax payer? Nope. You have to know what the current years 40% threshold is, add your personal allowance and see if your current monthly income x12 is greater that this.

I doubt the majority of people regularly check this, and its quite tricky anyway if you have irregular income. Even the P60 doesn't make it obvious that you paid higher rate tax for a year.

Mikeyorks

comdw wrote: »

Is it obvious from most peoples payslip that they are a higher rate tax payer? Nope.

The fairly dramatic increase in monthly tax deductions does tend to act as a bit of a giveaway!

comdw

Mikeyorks wrote: »

The fairly dramatic increase in monthly tax deductions does tend to act as a bit of a giveaway!

Its not dramatic if your income is creeping up - only the amount over the threshold is taxed at 40% - this could be a few quid only.

jem16

Mikeyorks wrote: »

The fairly dramatic increase in monthly tax deductions does tend to act as a bit of a giveaway!

In my case it's savings interest that takes me into higher rate tax so looking at tax deductions wouldn't help at all. As far as my earned income is concerned I'm a basic rate taxpayer.

comdw

jem16 wrote: »

In my case it's savings interest that takes me into higher rate tax so looking at tax deductions wouldn't help at all. As far as my earned income is concerned I'm a basic rate taxpayer.

This is another good example. You should be declaring this of course, but the average joe probably wouldn't know that.

nzseries1

comdw wrote: »

This is another good example. You should be declaring this of course, but the average joe probably wouldn't know that.

This is the whole thing that got me thinking in the first place. There must be more than a handful of people like this, but how are you supposed to know the rules?

I personally thought that HMRC would know I'm getting interest, and would automatically adjust my tax code for next year. I didn't think I'd have to specifically tell them about it.

RayWolfe

"Ignorance of the law is no defence."
Most people would have a warning from the tax office if they were no declaring their interest. As was stated above the banks etc have to notify the revenue of any interest paid.

jem16

comdw wrote: »

This is another good example. You should be declaring this of course, but the average joe probably wouldn't know that.

I'm not the "average joe" - I am declaring it and have been for the past 6 years.

I am also paying more into my pension to avoid the higher rate tax completely.

Hildog

Hungerdunger wrote: »

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.

Rubbish, Is this man not entitled to the sweat of his brow? He clearly has not with the greatest of respect got a very high paying job, it is only through extra time that he is in the top bracket. The government ought to be lenient on someone who clearly works very hard for his money.

nzseries1

Hildog wrote: »

Rubbish, Is this man not entitled to the sweat of his brow? He clearly has not with the greatest of respect got a very high paying job, it is only through extra time that he is in the top bracket. The government ought to be lenient on someone who clearly works very hard for his money.

Personally (and in general) I agree with you, however it's an age-old debate isn't it, and I can see valid arguments for both sides