40% tax for regular bank savings

lvader

DavidHayton wrote: »

How small is "very small"? David

I'd suggest that anything less than £100 isn't worth thinking about.

coley54321

CLAPTON wrote: »

personally I never bother with very small sums e.g. the interest on current a/cs (largely zero now of course)

This is an interesting point though. as is what Ivader says.

At what point does it become necessary?

Is every 40% tax payer on this forum culpable for not declaring the extra 20% tax via a tax return for the statement line each month saying "£1.61 interes net of tax"?!? With inflation so high and interest rates so low, you'd argue they'd have a cheek asking for it anyway, but that's an argument for another day.

At what point does it become a concern? When you have £100 savings, £5000, £10k, 50k?!

I'll ask a question again - If I don't even recall what online accounts I've opened and closed in the last few years, then how can my 'declaration' possibly be accurate?

CLAPTON

if all your account have been with your bank as you imply, then you could try asking them for annual interest statements

jamesd

Your bank can't know your tax situation in part because you can change it on the last day of the tax year by making a pension contribution that uses up all of your higher rate income, including that from the interest. most savings accounts won't have a clue about your overall income either, because you won't bank with them for everything. If you have shares that pay dividends, same story. So the choice is between telling HMRC about all of your tax affairs or telling every financial institution that might pay you taxable income. Telling only one place, HMRC, is far more efficient and less invasive of your privacy.

For past years you can estimate the amount of interest and ask HMRC whether they would like to tax on the basis of your estimate of have you try to obtain more precise information.

Yes, every person who's due to pay tax who hasn't sent a letter to HMRC telling about it is in theory liable but HMRC isn't going to care much about amounts that aren't worth their administrative cost.

Stompa

coley54321 wrote: »

I'll ask a question again - If I don't even recall what online accounts I've opened and closed in the last few years, then how can my 'declaration' possibly be accurate?

Clearly it won't be, but strictly speaking you are supposed to keep records:

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/SelfAssessmentYourTaxReturn/DG_10014923

lvader

CLAPTON wrote: »

if all your account have been with your bank as you imply, then you could try asking them for annual interest statements

That is what I did when I used to do tax returns in the past. The tax office got fed up and asked me to no longer make returns.

coley54321

jamesd wrote: »

Your bank can't know your tax situation in part because you can change it on the last day of the tax year by making a pension contribution that uses up all of your higher rate income, including that from the interest. most savings accounts won't have a clue about your overall income either, because you won't bank with them for everything. If you have shares that pay dividends, same story. So the choice is between telling HMRC about all of your tax affairs or telling every financial institution that might pay you taxable income. Telling only one place, HMRC, is far more efficient and less invasive of your pricacy.

Good point James. I'm obviously no expert on this.:)
It just concerns me that I wasn't aware. I'm frustrated at not knowing this; which as I think you'd agree more people probably fall into this camp than don't. And I doubt the HMRC has enough time on their hands to chase up every case. Which is equally concerning that the system isn't as efficient as it could be.

I am happy to (begrudingly) pay the tax. That was somewhat of an oxymoron, but you know what I mean. It just baffles me how much taxation the system must be missing out on - i must surely be one of many in this situation!!

jimjames

coley54321 wrote: »

Surely the banks know I'm a 40% tax payer by the amount of money coming in each month? It wouldn't be too hard for some legislation to require them to ask that question when setting up the account would it?

If I transfer money between my accounts at different banks then it would give a false impression of income that is not actual income. If I have a savings account that I don't pay income into then the bank have no idea of knowing that I am a taxpayer or any sort.

If you set the designation when you open the account then it could change later or your income changes after the account is opened.

Any of these scenarios would be a logistical nightmare to manage so the easiest option is to declare on a tax return. HMRC do tend to send out returns to people who are higher rate taxpayers but if they file nil returns for a couple of years then stop.

If you have savings then one option other than an ISA is to put the savings in husband/wife's name if they are a basic rate taxpayer so that no further tax is due.

Stompa

Take a read of this, which explains how it works:

http://www.hmrc.gov.uk/taxon/bank.htm

lvader

jimjames wrote: »

Any of these scenarios would be a logistical nightmare to manage so the easiest option is to declare on a tax return. HMRC do tend to send out returns to people who are higher rate taxpayers but if they file nil returns for a couple of years then stop.

This is what happened to me, every year I was sending a return in which they owed me. Many high rate tax payers pay too much tax due to not claiming back pension tax relief. Now I receive the pension tax relief in the form of a higher personal allowance. They don't care that I'm making small amount of extra interest payments from bank accounts.