2016 no tax on first £1000 interest earned

Eco_Miser

Frogletina wrote: »

it should still be the case that even if I go over the £1000 interest, it would not be worth moving my money out of my higher interest accounts.

That's right! There's no change to the logic, just an extra £200 tax saved, or no point at all in cash ISAs if the interest will be under £1000.

Depending on your time-scales, an S&S ISA may be worthwhile.

tg99

masonic wrote: »

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.

Where does the 6 years come from as thought it was 22 months after the end of the tax year you had to keep records?

masonic

tg99 wrote: »

Where does the 6 years come from as thought it was 22 months after the end of the tax year you had to keep records?

Where does the "22 months after the end of the tax year" come from?

For negligent behaviour, HMRC can assess back up to 6 years for unpaid tax (as it is difficult to prove you've taken reasonable care). In practice the 20 year limit is applied to deliberate evasion, I believe. So if you don't have records going back 6 years, you are not in a position to challenge any tax HMRC claim you underpaid.

http://taxaid.org.uk/guides/taxpayers/undeclared-income/step-3-higher-level-of-undeclared-income

How many years will HM Revenue and Customs go back?
The time limits are:
4 years in all circumstances where the taxpayer has taken reasonable care to submit a correct return
6 years in all circumstances where the taxpayer has failed to take reasonable care
20 years where the taxpayer has failed to notify liability, or has deliberately understated a tax liability

tg99

masonic wrote: »

Where does the "22 months after the end of the tax year" come from?

For negligent behaviour, HMRC can assess back up to 6 years for unpaid tax (as it is difficult to prove you've taken reasonable care). In practice the 20 year limit is applied to deliberate evasion, I believe. So if you don't have records going back 6 years, you are not in a position to challenge any tax HMRC claim you underpaid.

http://taxaid.org.uk/guides/taxpayers/undeclared-income/step-3-higher-level-of-undeclared-income

22 months from here:

https://www.gov.uk/keeping-your-pay-tax-records/how-long-to-keep-your-records

masonic

tg99 wrote: »

22 months from here:

https://www.gov.uk/keeping-your-pay-tax-records/how-long-to-keep-your-records

That's if you send a tax return (in which case you've already provided the information to HMRC). Those people who think they might accidentally go over the £1,000 allowance without noticing are unlikely to be submitting returns as they'd be forced to add up the interest they earned if they did. I'd still keep records for 6 years, even if filing a return. Otherwise, what comeback would you have if there were a mix up or dispute?

MiserlyMartin

OK so I understand ISA's are not treated as part of the £1000 allowance, but what about NS & I index linked savings certificates etc.?

I've seen no discussion about this anywhere. OK its not an ISA, but they are tax free. They ought not to be included!

masonic

MiserlyMartin wrote: »

OK so I understand ISA's are not treated as part of the £1000 allowance, but what about NS & I index linked savings certificates etc.?

I've seen no discussion about this anywhere. OK its not an ISA, but they are tax free. They ought not to be included!

Only taxable interest is included.

schiff

One aspect of all this that hasn't been touched on much is the situation of the BR taxpayers who have succeeded in getting themselves off the annual return system - earned income under PAYE, interest taxed at 20%, etc as defined in the following:

https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return

It's a huge relief not having to be bothered with HMRC and I for one will be ensuring my 'qualifying under the new rules' interest is very little more than £1000, if that! Whatever loss that entails will be small and well worth it!

Archi_Bald

I think you are vastly over-dramatising what it means to make a self-assessment tax return if your affairs consist of salary/pension and savings interest only. For those people, it takes in the region of 5, max 10, minutes to submit an online return once a year.

To say you'd keep your savings interest below £1,000 just so you can avoid a tax return seems like cutting your nose off to spite your face.

If your affairs are more complex, e.g. if you have income from BTL or foreign income, you most likely don't have a choice anyway and have to submit a tax return.

There is also a possibility that we will have online tax accounts by the time we need to declare our income for the tax year 2016-17. That's not before sometime in mid-2017 at the earliest, so a very long time away still.

bigfreddiel

steve65e wrote: »

No, I'm pretty sure thats going, to be replaced by the new £1k allowance.

No it's not, the £5,000 tax free interest applies to people who earn about the tax free allowance of £10.6k, £11k next year. So this year if your total income is less than £15.6k it's all tax free, next year it will obviously be £16k.

Then on top of that you can get £1,000 tax free interest.

Marvelous innit!

Cheers fj