123 account and tax

Chin

Hi peeps

I've just transferred some savings into a 123 Santander Account.
It's my first so just wondering if someone can assist with how the tax side of things work.
From what I've read online the interest will be taxed at the basic rate, however I am a higher rate tax payer so a little unclear as to the process of ensuring the correct amount is deducted.

I got the paperwork through from HMRC and as far as I understood it the end result was I didn't have to send those papers back as the return result from them was to be exempt from paying the tax.

Do I need to do a manual tax return now each year? Usually my employer handles all tax through my monthly salary so a complete newbie to the process.

In an ideal world to create as little work as poss Santander would tax the interest at the higher rate but I'm unsure if they can do this?

Any experiences people can share?

Cheers

purdyoaten

Santander will tax the interest at 20% or, in the case of a non-taxpayer, not at all. You must declare the interest to the taxman in order that the additional tax is charged.

If you have received the forms from HMRC, or a notice to file online, you must so do to avoid automatic penalties whether you owe any money or not!

Chin

Yes thanks
Is the best process of giving them the difference back via the Self Assessment process?
Do I need to apply to do this online?

It's not a very clear process for a complete newb in this area!

purdyoaten

Yes - you declare the interest for this tax year - 2014-15 - on the return that will be issued next April - tax will be payable 31st January 2016. You will have an account which will have the liability debited upon filing the return. Pay and file online or by post.

jem16

Chin wrote: »

Yes thanks
Is the best process of giving them the difference back via the Self Assessment process?
Do I need to apply to do this online?

It's not a very clear process for a complete newb in this area!

If it's only a case of declaring interest payments for higher rate tax, then a simple phone call to HMRC and then an adjustment to the tax code will suffice.

However if you have been requested to complete a tax return then you must do so. Online SA is certainly easiest.

Can you clarify what you mean by getting paperwork through from HMRC? Exactly what was the paperwork?

colsten

Chin wrote: »

.......I am a higher rate tax payer........

I got the paperwork through from HMRC and as far as I understood it the end result was I didn't have to send those papers back as the return result from them was to be exempt from paying the tax.

You are either a higher rate tax payer, or you are exempt from income tax. Can't be both. May be the paperwork you got didn't refer to income tax?

Interest on savings is subject to income tax. If you are a higher rate tax payer, or if your interest gets paid without tax deduction, you must tell the HMRC how much interest you got paid.

Making an online self-assessment is very easy. Lots about it on the HMRC website: http://www.hmrc.gov.uk/sa/understand-online.htm

Chin

Thanks guys for the additional help.
The paperwork I got within my welcome pack from Santander was to be exempt from paying tax on the interest. As I am a higher rate tax payer this didn't apply to me so I binned it.

The self assessment will be solely to declare the extra income from the interest on the account as my regular method is PAYE.

I will call HMRC and explain this and perhaps as jem16 suggest my regular tax code can be adjusted. Would this happen instantly or do I do this at the end of the financial year? Reason for asking is the balance in the account will change monthly so unsure as to how HMRC would keep a track of how much interest I'm earning without me manually telling them either each month or the end of the year?

YorkshireBoy

Chin wrote: »

...the balance in the account will change monthly so unsure as to how HMRC would keep a track of how much interest I'm earning without me manually telling them either each month or the end of the year?

Read post #4 again...slowly.

SuperHan

Just ring HMRC and ask.

They'll give you the best advice.

Hominu

Santander will send you a document containing things like "Gross Interest Before Tax", "Tax Taken" and "Net Interest Paid Into Your Account", this is the perfect document for filling in a SAF at the end of the tax year.

Since total interest possible is £600, then tax will be £240 of which Santander will automatically debit half of that, so you can simply have your tax code changed by £120 (assuming you keep 20K in your account all year).

Chin

YorkshireBoy wrote: »

Read post #4 again...slowly.

yes this seems logical if i were to do a self assessment tax form, but it contradicts what Jem16 is saying about HMRC just adjusting my tax code.

I think as one other poster suggests a call to HMRC will probably be easiest but just wanted to gauge opinions on here first to see if there were any tips.

Seems like a bit of a minefield and the literature from Santander makes minimal reference to it whatsoever. I wonder if there are other people are in a similar situation and don't declare the additional income (tax) because they're unaware/oblivious...