Does a bank know my tax rate and adjust interest?

mbbetter

Hi firstly appolgies for what may appear as complete ignorance:

I have not has a taxable savings account for the past 6 years. I have since become a higher rate tax payer.

I have just set-up a savings account (First Direct's Regular 8% Gross). Terms state: "Interest will be paid after the deduction of the basic rate of savings tax, currently 20%."

I am a higher rate tax payer. Do I need to inform First Direct, or will FD automatically adjust the tax?

I have looked at this page http://www.hmrc.gov.uk/sa/need-tax-return.htm

I am fulltime employed PAYE and don't fullfill any of the other critera - but should I be filling out a tax return form?

Also a 2nd area of concern is that I have a Halifax Reward account and noticed this in their terms:

"If you're a higher-rate taxpayer, you may have to pay extra income tax on the reward payment."

http://www.halifax.co.uk/bankaccounts/current-accounts/reward-current-account/?WT.seg_3=Common/promotion/banking/hpos3/bankin-rewardac-pos3-rewardac00

Any advice very much appreciated. I've not had this problem before as I've been in the 20% tax band.

Thanks in advance

Lokolo

Yes you will need to pay the other 20% yourself by informing HMRC.

Not sure the exact process, but you should get a tax certificate from FD showing any interest and the tax paid on it, so just send a copy of it, an overhead letter and a cheque and you should be fine.

Torry_Quine

They won't take off the extra tax you are due. Don't know how it works I'm a non-tax payer myself.

cloud_dog

If you complete a Self Assessment you should include the interest information in that, alternatively after you have received your Tax Certificate from the bank write a letter informing HMRC of the tax received and they will most likely adjust your PAYE code to collect the additional tax.

HappyMJ

You don't have to fill out a tax return but as you are a high tax payer then I would advise checking with a tax accountant to see how you can reduce your income to minimize your tax liability. Increasing your pension payments is one way as you will get more money in the future and get a 40% tax rebate now on those payments and if made from payroll you can also save on NI contributions too. If you have children you can get childcare vouchers to reduce your tax and NI.. The fee you pay the accountant to prepare your tax return can also be deducted so it will be worth it.

mbbetter

Many thanks to you all apreciated - very swift responses.

Looks like I need to visit the MSE Tax board.

Its a bit annoying that I have to fill out a self assesment form for just £80 worth of interest.

badger09

mbbetter wrote: »

Many thanks to you all apreciated - very swift responses.

Looks like I need to visit the MSE Tax board.

Its a bit annoying that I have to fill out a self assesment form for just £80 worth of interest.

You won't have to fill out a self assessment form for this amount of interest. Just write to your tax office, tell them amount of interest you've received up to 5th April 2012 and they will adjust your code number so you pay the additional tax due on the interest, through your salary. Simples

le_loup

You don't!
Why people make this sound complicated, I don't know.
All you have to do is let HMR&C know you are getting bank interest taxed at the lower rate and they will adjust your code or allow you to pay the difference as a once-off.
The last thing you need is a"tax accountant".

thenudeone

It can probably be handled by a letter and a tax code adjustment, as stated above, although I expect everyone earning £50k or more will be soon roped in to self-assessment anyway, to check if they need to be taxed to remove any child benefit:(

xylophone

I can never understand the reluctance to fill in a self assessment form - it is not that difficult and it enables one to keep an eye on one's affairs and make sure that all tax due is paid!

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

mbbetter

Thanks again all.

xylophone - thanks for the link looks a pretty simple thing to do. Also gotta explain to the wife she now needs to do this if she goes for this FD account.

Not sure why FD can't just do this at my tax rate - they know my NI number.

Also any thoughts on the £5 halifax "reward" is that interest? Looks like I've been tax dodging for a while as I haven't been declaring this .

Cheers,