Taxing savings on Self Assessment

BlueVinney

I'm just completing my Self Assessment and have hit a snag. Most of my savings are in ISAs and not liable to have the interest taxed but one is not an ISA so tax is paid by the bank and the net amount is paid to me. I'm a standard rate tax payer.

The HMRC site states for such savings

If you're a basic rate (20 per cent) taxpayer you don't need to take any action. No extra tax is due.

However for completeness I decided to enter the information on-line in the 'UK Interest' section and the tax liability agrees with the information supplied by the bank. However after entering it the full tax calculation has now shown that I've underpaid tax. I remove details for the account and the tax calculation removes the charge, re-enter it and the charge comes back. The gross interest is about £300 and the calculator shows an increased liability of about £30 in addition to the £60 paid by the bank.

So why am I being charged? Should I do what the HMRC FAQs advises and not enter that account or enter the interest details and pay the charge for underpaid tax? Is the tax calculator on the HMRC site wrong?

Any help appreciated as my tax return is due.

Stompa

I think it needs to be entered. Try comparing the 'View your calculation' page with it entered and not entered, it may enable you to figure out what is happening.

Mikeyorks

BlueVinney wrote: »

Is the tax calculator on the HMRC site wrong?

Very unlikely. I suspect you're somehow getting the figures wrong? It's the net amount (circa £240) you enter?

dori2o

BlueVinney wrote: »

I'm just completing my Self Assessment and have hit a snag. Most of my savings are in ISAs and not liable to have the interest taxed but one is not an ISA so tax is paid by the bank and the net amount is paid to me. I'm a standard rate tax payer.

The HMRC site states for such savings

If you're a basic rate (20 per cent) taxpayer you don't need to take any action. No extra tax is due.

However for completeness I decided to enter the information on-line in the 'UK Interest' section and the tax liability agrees with the information supplied by the bank. However after entering it the full tax calculation has now shown that I've underpaid tax. I remove details for the account and the tax calculation removes the charge, re-enter it and the charge comes back. The gross interest is about £300 and the calculator shows an increased liability of about £30 in addition to the £60 paid by the bank.

So why am I being charged? Should I do what the HMRC FAQs advises and not enter that account or enter the interest details and pay the charge for underpaid tax? Is the tax calculator on the HMRC site wrong?

Any help appreciated as my tax return is due.

Are you entering the net or the gross figure for the intrest. I'm pretty sure on the online system that you only enter the net figure not the gross as the system will automatically gross up the figure.

tyllwyd

I had trouble with the worksheet that was supposed to calculate the tax due if you had a few savings accounts. I had about 5 accounts (and total interest in the year of less than £2!) When I entered the gross amount, it calculated the tax paid on that amount and it all looked fine. But when I went back to the form, it had treated the gross figures as the net amounts, and added the tax back on, so the gross amounts were too high. I went back and did it again, checking I'd chosen the worksheet for calculating net figures from the gross figures, but it still came up with the wrong result.

I gave up and put in the net figures, and everything was fine.

I don't know if it was just me, but I wouldn't trust the calculator with gross figures at the moment - you've got figures for net interest I'd put those in.

BlueVinney

Yes, initially I initially used the net amount (which it asks for on-line). You can specify that instead you will enter the gross amount or the tax deducted, by selecting the correct option. The bank gave me the gross interest, net interest and tax paid amounts so I tried each option and each time it gave the same result.

The figures from the bank were (approximately) gross interest £300, tax deducted £60 and net interest £240. So the figures show tax deducted been calculated at 20% tax rate.

I already have to pay a small amount on the tax return as I get some income which is not tax paid before I receive it. That's why I have to make a Self Assessment return.

Whether I enter the gross, net or tax paid, the amount HMRC say I owe goes up by £30. Take out that savings account and it goes down to the original amount. So in effect HMRC are saying I must pay a tax rate of 30% on the savings, they want £90 on gross interest of £300, rather than £60 (20%) which the Bank have taken off.

With all my income I come nowhere near the top of the standard rate tax band.

noh

Are you over 65?
If so your tax allowance of £9,490 is reduced by £1 for every £2 your income exceeds the Income limit for age-related allowances.

So for any income between £22900 and £28930 you will have a marginal income tax rate of 30%.

http://www.hmrc.gov.uk/rates/it.htm

BlueVinney

Doh! Thanks I just creep into that income band.

More important I try to forget how old I am and it's caught up with me now;).

susan2010

Pleasssseee Help

I'm doing my self assessments because i rent a property out and it is asking about savings and interests. I have several accounts. and can dig out the bank statements out, but only snag is, I don't know how to figure out in it is gross interest or net interest???

Also I don't understand why they want this information, also are they going to tax me on all these accounts? because if i didnt rent out a house, then I wouldn't have to pay extra tax on these accounts.

Sorry for being dumb. I'm a novice as you can see.

Mikeyorks

susan2010 wrote: »

I don't know how to figure out in it is gross interest or net interest???

It will always be net ..... unless you've filed an R85 to get gross interest. And - on a lot of statements - it will show the gross amount and the tax deducted at 20%.

If only net .... multiply by 5 and divide by 4 .... to get the gross.

susan2010

Thanks Mikeyork

Does that mean the figure on the statement is the net figure. and I use that in the SA?

and do you know if they will tax me on the interest gained?