Does a bank know my tax rate and adjust interest?

jem16

mbbetter wrote: »

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

Thanks in advance

Do make sure you are definitely in the higher rate tax band. Your pension contributions ( assuming you make any) may be taking you below it.

jem16

mbbetter wrote: »

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

How will your NI number help them to work out your tax rate? Not all taxable income attracts NI contributions.

Banks only take off the basic rate of tax from everyone except those that complete an R85 to register for gross interest.

mbbetter

jem16 wrote: »

Do make sure you are definitely in the higher rate tax band. Your pension contributions ( assuming you make any) may be taking you below it.

Thanks for the idea Jem,

I'm sure I'm in the 40% band even with pension factored in. I have been in this bracket for the past 2-3 years but haven't had any taxable income from savings. (other than the £5 a month "reward")

jem16

mbbetter wrote: »

Thanks for the idea Jem,

I'm sure I'm in the 40% band even with pension factored in. I have been in this bracket for the past 2-3 years but haven't had any taxable income from savings. (other than the £5 a month "reward")

Basically add up all of your income from salary, gross savings interest and any taxable benefits from work. Then take off £8105, then £34,370, then your pensions contributions.

If there is still something left it's taxable at 40%.

HappyMJ

le_loup wrote: »

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".

xylophone wrote: »

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

I have no idea. The £100 spent on using the services of a taxation accountant could save someone a lot more than £100. They ask many questions that are relevant to your line of work. do you use a vehicle whilst at work? How many miles? 45p for every mile can be deducted. Do you use specialized clothing only for work? The cost of which and the cost of cleaning can be deducted. Do you use a mobile for work related phone calls? The cost of thse calls can be deducted. Do you take work home and use a space at home to complete that work? Did the work have to be completed at home? £3 deduction for every week that some work is done at home.

An accountant will advise you on ways to structure your affairs to reduce your tax such as putting savings in the name of your partner who pays less tax. Maybe saving as much as you can in ISA's. Accountants are there to save you money over and above their fee.

MP's use accountants and they do not pay high rate tax due to deductions. If they can do it then everyone can.

psychic_teabag

mbbetter wrote: »

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 .

Yes, it's interest. Basic-rate tax has already been deducted, so it's £6.25 gross.

Mikeyorks

mbbetter wrote: »

(other than the £5 a month "reward")

The 'interest' is £15pa ........ so you've been undercooking your tax to the rate of £3 per year! I doubt HMRC are awaiting your call.

Joining SA just to declare extra interest ..... is a daft idea. No matter how easy some on here consider it is. They invented the P810 to cover that - many years ago.

You just have to contact HMRC and give them an estimate and they will Code it out. The P810 then keeps a periodic check on it.

Also gotta explain to the wife she now needs to do this if she goes for this FD account.

So your wife's income also exceeds £42,475?

If not the sensible thing is to shift interest creation into her name.

mbbetter

Mikeyorks wrote: »

The 'interest' is £15pa ........ so you've been undercooking your tax to the rate of £3 per year! I doubt HMRC are awaiting your call.

Joining SA just to declare extra interest ..... is a daft idea. No matter how easy some on here consider it is. They invented the P810 to cover that - many years ago.

You just have to contact HMRC and give them an estimate and they will Code it out. The P810 then keeps a periodic check on it.

Thank you Mikeyorks - I'll look into the P810 as it seems the most straight forward route to go with this. I will declare the £5 reward from this FY onwards.

Mikeyorks wrote: »

So your wife's income also exceeds £42,475?

If not the sensible thing is to shift interest creation into her name.

Her income does exceed this, but if in the future it drops I'll look to switch things to her.

Amazing really that I've got to the ripe old age of early 30's before figuring the tax situation with savings - I guess that's offset saving for you.

Thanks again

Paul_Herring

xylophone wrote: »

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!

Or to make sure it's not over-paid as it was for me 2 years on the trot (I was getting occasional site-rates on top of a salary where I worked, and accounts somehow managed to screw my tax up to the tune of £1,500 over those two years.)

Moist_von_Lipwig

Originally Posted by mbbetter
(other than the £5 a month "reward")

Mikeyorks wrote: »

The 'interest' is £15pa ........

Doesn't 12x£5 = £60pa 'interest' pa?