Self assessment - need to declare this interest?

jennifernil

When you are only PAYE, you do still have to tell HMRC about any untaxed interest you may get, and if you are a higher rate taxpayer you also need to tell them about even taxed interest as there will be extra tax to pay.

Only basic rate tax on interest is deducted at source.

TrickyThings

Hang on, so anyone earning over (approx) £32k on PAYE should be filling in a self assessment?

Literally the first time I've been made aware of that, I thought the whole point of PAYE is you don't have to worry about self assessment, I always assumed that was the whole point of tax codes.

Oh boy. Well I've been over £32k for approx 5 years (will have to check records on when that happened exactly) and never done a self assessment until now. I've probably earned less than £20 in interest in all that time, as the majority of my money has either gone into tax free ISA or a no-interest current account, but I have used a few savings accounts.

Any advice?

zygurat789

TrickyThings wrote: »

Hang on, so anyone earning over (approx) £32k on PAYE should be filling in a self assessment?

Literally the first time I've been made aware of that, I thought the whole point of PAYE is you don't have to worry about self assessment, I always assumed that was the whole point of tax codes.

Oh boy. Well I've been over £32k for approx 5 years (will have to check records on when that happened exactly) and never done a self assessment until now. I've probably earned less than £20 in interest in all that time, as the majority of my money has either gone into tax free ISA or a no-interest current account, but I have used a few savings accounts.

Any advice?

Whatever makes you think that? It was stated very clearly that it was once your income put you into higher rate tax, £41,865, 2014/15, £41,450 2013/14 £42,486 2012/13 & 3011/12.

TrickyThings

Ah, so over approx £41k/£42k means I'd need to be doing a self assessment? In which case, that's not me as not earning that much.

I was going by higher tax rate kicking in at £32k based on the UK gov site figures (can't post link) for 2013/2014:

Basic rate: £0 to £32,010
Higher rate: £34,371 to £150,000

But I'm guessing the £41k/£42k is taking into account personal allowances on top of the £32,010k?

I earn £36,000 which I thought made me a higher rate tax payer?

Thanks once again.

zygurat789

TrickyThings wrote: »

Ah, so over approx £41k/£42k means I'd need to be doing a self assessment? In which case, that's not me as not earning that much.

I was going by higher tax rate kicking in at £32k based on the UK gov site figures (can't post link) for 2013/2014:

Basic rate: £0 to £32,010 2012/13, £34370 for 2013/14
Higher rate: £34,371 to £150,000 2013/14

But I'm guessing the £41k/£42k is taking into account personal allowances on top of the £32,010k? That's a correct guess

I earn £36,000 which I thought made me a higher rate tax payer? Then you've had some good news today.

Thanks once again.

...................

TrickyThings

Thank you! Phew, minor heart attack over and I'm now much better informed.

Thank you all so much, especially zygurat789, for sticking with me and my stupidity!

CLAPTON

TrickyThings wrote: »

Thank you! Phew, minor heart attack over and I'm now much better informed.

Thank you all so much, especially zygurat789, for sticking with me and my stupidity!

just to add

that a PAYE person earning over the 40% threshold and also benefiting form some saving interest, would not usually have to fill in self assessment forms: a simple letter /phone call to HMRC will suffice

TrickyThings

Hi all,

General question: do you think the need to declare any interest earned for PAYE workers on a higher tax rate is well known by the public?

I've asked a lot of friends and colleagues about this and they were all oblivious. These were reasonable intelligent hard working people that were generally shocked or unbelieving when I explained they should be declaring the few pounds interest they get from their bank accounts.

As is obvious from my posts, I've never had anyone or anything from HMRC explaining this was something I needed to do (or not as is the case) and given HMRC seem pretty unconnected with what people are doing with their money and rely on people being both honest and informed, I wonder if they're doing enough to ensure people actually know about this?

Just a thought.

CraigR

WestonDave wrote: »

For completeness if you are a higher rate tax payer then you would have to do a tax return and declare interest (even if taxed at source) even if all your "earnings" (other than interest etc) are under PAYE. This is because you'd need to pay the extra 20% on the interest as its only taxed at source at 20% whereas you are due to pay 40% on the top part of your income. PAYE will take care of the first part through tax codes etc but the interest needs to be "upped" manually through the tax return. For reference dividends on shares (if held outside an ISA) would also need to be declared for the same reason.

This is incorrect, there are two income levels of relevance, firstly if you earn* over £100k or secondly if you earn* over £50K and you or your partner receive child benefit then you need to do a Self-Assessment return.

Earn* - This is technically Adjusted Net Income which takes into account all income and benefits provided by your employer. So a salary of £90K, £9k of Car Benefit and £2k of savings interest would put you over the £100k threshold.

zygurat789

TrickyThings wrote: »

Hi all,

General question: do you think the need to declare any interest earned for PAYE workers on a higher tax rate is well known by the public?

I've asked a lot of friends and colleagues about this and they were all oblivious. These were reasonable intelligent hard working people that were generally shocked or unbelieving when I explained they should be declaring the few pounds interest they get from their bank accounts.

As is obvious from my posts, I've never had anyone or anything from HMRC explaining this was something I needed to do (or not as is the case) and given HMRC seem pretty unconnected with what people are doing with their money and rely on people being both honest and informed, I wonder if they're doing enough to ensure people actually know about this?

Just a thought.

There is a legal term "ignorance excuses no one"; it is your responsibility to find out and comply with the law.
Over the last few years the government has raising the personal allowance to take low earners either out of tax altogether or reduce their tax payable. So that higher earners do not also benefit the higher rate band threshold has not been increased resulting in more people paying higher rate tax, after all someone has to pay for it. Tax is a big thing in most peoples lives, it is up to you to ascertain how it will affect you so that you can comply with the law or face the penalties.