Tax Free Savings Guide

Doreen21

Does the interest gained from a personal ISA count towards annual tax free allowance on savings?

Doreen21

I am currently working and receiving a small pension all add up to about £15K. My tax is deducted at source. I am due to earn about £1000 from a bond.  Do I need to inform HMRC for taxation or will bond provider do that and HMRC will adjust tax code?

Dazed_and_C0nfused

Doreen21 said:

I am currently working and receiving a small pension all add up to about £15K. My tax is deducted at source. I am due to earn about £1000 from a bond.  Do I need to inform HMRC for taxation or will bond provider do that and HMRC will adjust tax code?

If your total interest is less than £10,000 and you don't normally need to complete a tax return them you don't need to do anything.

The bank/building society will notify HMRC of the interest and HMRC will check if any tax is owed.

Assuming you haven't applied for Marriage Allowance then the first ~£3.5k of your interest will be taxed at 0%.

NB.  Interest from ISA's is exempt from tax and can be forgotten as far as your income tax position is concerned.

FrustratedPython

Due to an inheritance that I'm slowly getting properly invested, I have a substantial amount of interest income this year.  My other income (mainly self-employment) is not high, but probably going to be over the threshold for the starter rate.  However I think if I pay into a SIPP I can bring my taxable income below the threshold?  In which case, since I have money I want to invest one way or another, it makes a lot of sense to do so (maybe saving £1000 in tax on interest income).  I think I may need to make such a SIPP payment as a gross payment rather than having the platform "reclaim" the tax rebate on my behalf, for it to bring my earned income down in the calculations.

Does this thinking sound right to anyone else?

I've ended up trying to read the Finance Act online but navigating it is proving ... tricky ... !

Dazed_and_C0nfused

FrustratedPython said:

Due to an inheritance that I'm slowly getting properly invested, I have a substantial amount of interest income this year.  My other income (mainly self-employment) is not high, but probably going to be over the threshold for the starter rate.  However I think if I pay into a SIPP I can bring my taxable income below the threshold?  In which case, since I have money I want to invest one way or another, it makes a lot of sense to do so (maybe saving £1000 in tax on interest income).  I think I may need to make such a SIPP payment as a gross payment rather than having the platform "reclaim" the tax rebate on my behalf, for it to bring my earned income down in the calculations.

Does this thinking sound right to anyone else?

I've ended up trying to read the Finance Act online but navigating it is proving ... tricky ... !

Contributing to a SIPP would be done via the relief at source contribution method and those contributions don't reduce your taxable income.

You don't get a choice in the contribution method so sadly that isn't a viable option to reduce your taxable income.

You would get the basic rate relief added to your pension and an increased basic rate band but that's of no use in the situation you describe.

FrustratedPython

Since I am self-employed, can I make an "employer's contribution" to a SIPP?  I'm thinking I'll call my provider tomorrow to see what I can find out.

FrustratedPython

In case anyone finds it helpful, I'm with interactive investor and it is possible to make contributions "gross" to a SIPP.  I will probably try to check with HMRC once their January rush is over ...

Connie

Re untaxed interest on savings -

The advice from HMRC is that  banks/building societies will notify HMRC of any interest on your accounts, and that therefore  you don't have to inform HMRC of interest yourself.  (So long as you're not someone who has to submit a self-assessment),

However, many people posting on various sites say that not all banks do notify HMRC.

Nationwide, Chase and Santander have been mentioned as being some which don't.

If this is the case, HMRC should update their advice.

eskbanker

Connie said:

However, many people posting on various sites say that not all banks do notify HMRC.

Nationwide, Chase and Santander have been mentioned as being some which don't.

If this is the case, HMRC should update their advice.

The 'if' is doing some heavy lifting there - "many people" say all sorts of things on "various sites" but that doesn't necessarily make them credible.  However, feel free to share some specific links....

masonic

Connie said:

Re untaxed interest on savings -

The advice from HMRC is that  banks/building societies will notify HMRC of any interest on your accounts, and that therefore  you don't have to inform HMRC of interest yourself.  (So long as you're not someone who has to submit a self-assessment),

However, many people posting on various sites say that not all banks do notify HMRC.

Nationwide, Chase and Santander have been mentioned as being some which don't.

If this is the case, HMRC should update their advice.

All banks must by law notify HMRC about any interest they pay direct to their customers. The only reports I've seen of banks not reporting interest are arrangements through concierge services (Raisin, Hargreaves Lansdown Active Savings, etc) where the institution may not have the customer information needed to make a disclosure. This would not apply to Nationwide, Chase or Santander.

Could you share links to these various sites saying that Nationwide, Chase or Santander do not comply with their reporting requirements (for interest not on this list of exclusions)?