2016 no tax on first £1000 interest earned

zagfles

alibean121 wrote: »

You don't always know what you're going to need at the time. By the time I worked out what I should have done, I'd mucked it up for 2 years worth.

Anyways, I think a lot of people also might not realise they're over the thousand until it's too late to keep the records.

Like now a lot of people don't realise that they'll be a HRT payer and so need to keep records, even of a trivial amount of bank interest. I know someone who's been a HRT payer for a few years now and didn't even realise he needed to keep records and declare his interest!! In the future he won't, as it'll never likely be more than £500 and he doesn't do tax returns.

noh

zagfles wrote: »

Really? Where would you declare it on your tax return? There doesn't seem to be a box for "annual payments" received (although there is one for annual payments made in the reliefs section).

These articles would seem to contradict you - they imply the reward payment is treated as interest. The Halifax don't seem to say anywhere.

http://www.thisismoney.co.uk/money/saving/article-3023407/Could-Halifax-Reward-customers-savings-tax-Budget-giveaway-snaffled.html

http://www.accountingweb.co.uk/anyanswers/halifax-reward-income-taxable/511137

Also this thread on TMF would seem to imply it's interest:

http://boards.fool.co.uk/bank-interestreward-11886099.aspx?sort=whole

The Halifax Reward payment is not interest it is income. Because it is not interest you unable to use a R85 to get it paid gross.
It's clearly not interest as the amount paid is not dependent on the balance held.
It is a contractual payment and HMRC currently treat it as an annual payment. I haven't seen anything yet saying how such payments will be taxed in 2016

zagfles

noh wrote: »

The Halifax Reward payment is not interest it is income. Because it is not interest you unable to use a R85 to get it paid gross.
It's clearly not interest as the amount paid is not dependent on the balance held.

This is the HMRC definition of interest. http://www.hmrc.gov.uk/manuals/saimmanual/saim2030.htm

Where does it say the amount paid has to be dependant on the balance held?

It is a contractual payment and HMRC currently treat it as an annual payment. I haven't seen anything yet saying how such payments will be taxed in 2016

Interest is a contractual payment. Do you have any evidence that HMRC regard it as an annual payment and not interest? In other threads people have reported that HMRC have told them to declare it as interest.

Krash420

I think you need to think about the Halifax "Reward" Payment as if it were an additional source of income. It is for all intents and purposes taxable income, which is why when you earn £6.25, you pay 20% (£1.25) interest on it, and get £5 net paid.

When the allowance is brought in, you'll still be getting paid £5 net, and higher rate task payers will need to continue to pay the extra £1.25, but on the flip side, it will not be deducted from your savings interest limit.

There's little point arguing as to whether or not it's interest, or other income, as based on the documents provided by Halifax it's not clear, as currently tax on both income and interest as far as bank accounts is concerned is the same (i.e. it assumes you use your tax-free allowance, and so just charges you at the basic rate).

The definition that zafles has linked to actually makes it clear that this is NOT an interest payment as:

Interest accrues from day to day even if payable only at intervals, and is, therefore, apportionable in respect of time between persons entitled in succession to the principal

The bolded part of the statement makes it clearly denote that it is not interest as it does not accrued, and it is not apportionable in respect of time and the principal amount.

zagfles

Krash420 wrote: »

I think you need to think about the Halifax "Reward" Payment as if it were an additional source of income. It is for all intents and purposes taxable income, which is why when you earn £6.25, you pay 20% (£1.25) interest on it, and get £5 net paid.

When the allowance is brought in, you'll still be getting paid £5 net, and higher rate task payers will need to continue to pay the extra £1.25, but on the flip side, it will not be deducted from your savings interest limit.

There's little point arguing as to whether or not it's interest, or other income, as based on the documents provided by Halifax it's not clear, as currently tax on both income and interest as far as bank accounts is concerned is the same (i.e. it assumes you use your tax-free allowance, and so just charges you at the basic rate).

There certainly is a point - if it's an "annual payments" then as far as I can see, it won't count in the "starting rate" of tax.

http://www.legislation.gov.uk/ukpga/2007/3/pdfs/ukpga_20070003_en.pdf

section 18

The definition that zafles has linked to actually makes it clear that this is NOT an interest payment as:

Interest accrues from day to day even if payable only at intervals, and is, therefore, apportionable in respect of time between persons entitled in succession to the principal

The bolded part of the statement makes it clearly denote that it is not interest as it does not accrued, and it is not apportionable in respect of time and the principal amount.

So are HMRC refusing to allow people to claim tax back if they're in the 0% "starting rate" band, ie earning around £11-15k?

masonic

alibean121 wrote: »

You don't always know what you're going to need at the time. By the time I worked out what I should have done, I'd mucked it up for 2 years worth.

Anyways, I think a lot of people also might not realise they're over the thousand until it's too late to keep the records.

One easy way to determine whether you should keep records of interest earned and tax deducted is to ask yourself the following question: do you keep any money in an account that pays interest?

You always know you are going to need to keep annual interest summaries or bank statements covering the past 6 years because anyone can be subjected to an HMRC investigation where this information will be required.

Most banks automatically provide this information and most banks also allow you to access bank statements going back several years, so I don't see that obtaining this information is going to be difficult. There is no time like the present to start gathering this information.

gadgetmind

Banks are a bit rubbish and slow at sending statements for even the last tax year, so you really need to keep on top of these things, particularly where you keep opening and closing accounts.

We have a section each in the filing cabinet for tax return related things, I keep track of dividends, pensions and capital gains in spreadsheets, and it only takes 1-2 hours each to do our Self Assessments. (OK, I've used an accountant for a few years due to my very complicated pension affairs, but I'm going to revert to DIY again next year.)

beefturnmail

Re the Halifax reward, if it is 'other income' rather than 'interest', where are you supposed to record it on SA? I have simply been recording it as interest, which doesn't make any difference (for me) at the moment but will once the interest free savings limit is brought on.

Also, does anyone know if this will have any effect on the Child Benefit Tax charge i.e. will you be able to deduct the tax free interest when working out if your income is over the £50k limit where this applies (the same way you can offset pension contributions)

sheramber

Other income goes on page 3 of the self assessment return- box 16 onwards.

calculate income for child benefit

https://www.gov.uk/child-benefit-tax-charge

melbury

I really don't understand the dividend thing.

Does it mean for example that when M&S pay their shareholders a dividend, there will not be any tax deducted from next April?

So if you hold a relatively small number of shares in various companies, all of the dividends will be completely free of tax up to £5K?