Tax on interest earned for people in 40% band

xyz123

Hye

I just got my pay rise and have now moved into the 40% income tax. :j

I have some questions regarding tax on interest earned from my savings in the banks.

1) What happens to tax deducted by my bank on the interest that i earn from my savings. I understand that banks deduct 20% tax and to get remaining 20% deducted i will have to file in a return. Or can i just tell my bank to cut 40% tax on interest so i dont have to go thorugh the hassle of filing a return. Can someone tell me some more information on it i.e. some HMRC website link or some form or something.

2) In case i have to file a return, i have a joint account with my wife, who is still in 20% income tax band, what happens in this case?

3) Also if i have to file my return i guess that would be for income from 1st october till 5th april next year (i moved in the 40% band on 1st october)

I am sure i saw a similar post in this forum sometime back (before i got my rise) but i cant find it now :eek:

Cheers
J

jem16

xyz123 wrote: »

Hye

I just got my pay rise and have now moved into the 40% income tax. :j

So you now have over £40,835 of taxable income? - reason I'm asking is that some people forget to include the personal allowance and interest from savings.

I have some questions regarding tax on interest earned from my savings in the banks.

1) What happens to tax deducted by my bank on the interest that i earn from my savings. I understand that banks deduct 20% tax and to get remaining 20% deducted i will have to file in a return. Or can i just tell my bank to cut 40% tax on interest so i dont have to go thorugh the hassle of filing a return. Can someone tell me some more information on it i.e. some HMRC website link or some form or something.

No the bank can only deduct 20%. You must inform HMRC. They may require a full tax return or they may ask you to fill in a short return or simply amend your tax code.

2) In case i have to file a return, i have a joint account with my wife, who is still in 20% income tax band, what happens in this case?

Joint interest is seen as half yours and half your wifes.

3) Also if i have to file my return i guess that would be for income from 1st october till 5th april next year (i moved in the 40% band on 1st october)

No it will be the whole tax year. You will work out your total income for the year - doesn't matter when you moved into this band.

RayWolfe

Don't forget that you are allowed to transfer the savings into your wife's name and continue to pay 20%.
It becomes her money so, if she has a passion for shoes, you could be in trouble doing that. ;-)

MrBeans

If HMRC do not send you a tax return to fill in you should ask them to send you one. You then have to return it before October 31st 2009 if you are filing by paper form or January 31st 2010 if you do it online.

Mikeyorks

MrBeans wrote: »

If HMRC do not send you a tax return to fill in you should ask them to send you one.

Not unless you specifically wish to complete an SA Return you shouldn't !

The days are long past when 40% = automatic admission to SA. These days if you are PAYE and your tax affairs are relatively simple, you advise HMRC and they're likely to merely accept a P810 every few years. Simple single page declaration which is much easier than joining SA.