Tax on savings for higher rate taxpayer

FatherAbraham

johan46 wrote: »

As a colleague told me, and I'm reading on HMRC website, since I'm a higher rate taxpayer, I now owe the taxman the difference between 20% and 40% on savings interest.

Is that correct? What do I need to do?

I should note that I never do self-assessment or anything really as I don't have any mortgages or property or other income. All my tax issues are sorted automatically using PAYG. Should I do something?

All you need to do is write a letter to your tax office (you should have the address on the notice of PAYE coding which is sent to you regularly), detailing the gross interest you've received within the relevant tax year, how much tax has already been deducted from it, and also tell about any Gift Aided donations you've made in that tax year (because these reduce your liability to income tax).

If you don't need all your income now, you should certainly consider deferring taking part of it, by paying it into a pension. This will reduce your tax bill now, you'll be able to take 25% free of tax when you crystallise your pension fund, and you'll be receiving the rest of deferred income at a time when you tax rate is likely to be lower. This saves you lot of money.

Warmest regards,
FA

Yorkie1

I just write them a letter once I've received all the Tax Certificates on my different accounts; setting out the gross interest, tax deducted from it, plus Gift Aid payments. I also include taxable pay and pension contributions in case it's relevant.

They then write back to me with an adjusted tax code or confirmation that all is OK.

thesaver79

johan46 wrote: »

@thesaver79: The problem is that I do not have any official documents showing how much I earn through savings, and it's all split between a few savings or current accounts with interest on different banks. Not sure how can I get the 'exact' number I earned last year!

You should soon receive tax statements for your saving accounts for the last financial year.

Alternatively, you can just infer it via your online banking, can't you?

kkgree1

Does anyone know if joint accounts are classed as 50/50 in terms of interest income, if one person is higher rate taxpayer and one basic rate? Thanks very much

Lokolo

kkgree1 wrote: »

Does anyone know if joint accounts are classed as 50/50 in terms of interest income, if one person is higher rate taxpayer and one basic rate? Thanks very much

Yes 50/50.

So if you have £100 interest in a joint account. £80 after 20%. The higher rate tax payer would then owe an additional £10.

latecomer

No idea but I'm interested in the answer as we have just opened a santander 123 account and one pays higher and the other basic rate.

I would imagine it will be taxed at the higher rate for all interest but would love to be wrong

edit : Too slow, already answered

eskbanker

Re interest on joint accounts, the rules are shown at http://www.hmrc.gov.uk/manuals/saimmanual/saim2420.htm