Self employed moving into 40%?

catoutthebag

I'm currently a basic rate taxpayer but sure I'll be in the 40 club for 12/13..

I'm guessing I'm still a basic rate payer for: earnings PLUS amount amount paid into personal pension for 12/13?

With my basic tax relief on PP, do Hmrc then give me a rebate from jan 2014 if my SA shows I've hit the 40 club for 12/13 automatically or do apply/request one?

If for 12/13 I'm sat in the 40 club, in jan 2014, is it my duty to inform banks and for them to retrospectively tax me on savings? Or could one play ignorant, as many do either knowingly or unknowingly ? I can of course close my account anytime...

For the above, I may not fall into the 40 club for 13/14 and beyond just to let you know

Also, sometimes I kindly donate to charity. What happens when I'm
In the 40 set? (I believe nothing happens while a basic guy?£

Pennywise

Your higher rate tax is sorted via your self assessment tax return for each tax year. Pensions will extend your basic rate band. Any H/R tax on interest etc will be collected via your annual SA payments - your bank can't take h/r tax off your interest.

cotswoldaccountant

If your taxable income takes you over the higher rate threshold for 2012-13, this will show up in your self assessment tax return for 2012-13.

When you make a personal pension contribution, this is made out of your net income. The pension provider claims 20% tax back from the government. You then get further tax relief to the extent that you have gone into the higher rate tax band (so, if you are only £100 over the higher rate tax threshold but have made £1000 of personal pension contributions, you will receive tax relief of 20% on £100 (i.e. £20) NOT 20% on £1000). This is all done through your self assessment tax return.

Your basic rate tax band is extended by the amount of any charitable donations made, and you will receive tax relief of 20% on charitable gifts to the extent that you are in the higher rate tax band.

Banks only ever deduct tax at 20% from the interest that they pay you. If interest is taxable at 40%, this will be calculated in your tax return, and you will pay the difference to HMRC as part of your self assessment (this will be the 40% tax due less the 20% tax already deducted from your interest income). You do not need to inform the bank that you are a higher rate taxpayer.

Once you have completed your tax return for 2012-13, if this shows a higher income than usual, this will make a difference to your payments on account for 2013-14, which will each be 50% of the 2012-13 tax bill. If you consider that your earnings are going to be significantly less in 2013-14, then you can make a claim to reduce your payments on account, but you need to be fairly sure of your future earnings, as if you say they will be reduced but they are in fact not, you will be liable to pay interest to HMRC if it turns out that you should have been making a higher payment on account.

catoutthebag

That clears up everything, :beer: