40% Tax on savings and Capital Gains Tax

emmb

Hi

I have some questions reference being a higher rate tax payer and interest received on savings/paying that tax:

I understand any interest paid out on a savings account (non iSA) has tax taken out automatically beforehand...but that if someone is a higer rate tax payer at 40% that the recipient they have to pay the extra tax due.

In this example the recipient is a higher rate tax payer due salary only and there is no other form of income except this interest therefore self assessment tax return not needed.

I know everyone has a Capital Gains Allowance per year before tax needs to be paid. Is interest included in this allowance or does the extra tax need to be paid regardless of the amount of interest received, be it £50, £500 or £5000?

If it needs to be paid .. How does it get paid/assessed/declared?

Thanks

tg99

Interest is outside of capital gains tax so the additional tax due will need to be paid - you have to let HMRC know and they can take the additional amount due via your employer.

jimjames

emmb wrote: »

I know everyone has a Capital Gains Allowance per year before tax needs to be paid. Is interest included in this allowance or does the extra tax need to be paid regardless of the amount of interest received, be it £50, £500 or £5000?

If it needs to be paid .. How does it get paid/assessed/declared?

Thanks

If it's a capital gain then it would be covered by the CGT allowance. If it's interest then it's not a capital gain.

You declare it on your self assessment form.

p00hsticks

jimjames wrote: »

If it's a capital gain then it would be covered by the CGT allowance. If it's interest then it's not a capital gain.

You declare it on your self assessment form.

You don't need to compete a full self assessment form - there is (or used to be) a one page from that asks just for savings interest and dividend income - but even that might not be needed now as HMRC get a lot of data automatically. I'd suggest ringing or writing to HMRC initially to see what they suggest.

jem16

emmb wrote: »

If it needs to be paid .. How does it get paid/assessed/declared?

Thanks

You phone up HMRC and tell them the amount of gross interest that you received. They will then adjust your tax code to take that extra tax due.

Do this every year so that they have accurate figures.

atush

or you could add more to a pension, to take yourself out of HRT

emmb

atush wrote: »

or you could add more to a pension, to take yourself out of HRT

Recently I have heard about paying more into your pension helping limit tax payable,( aswell as increasing your pension pot of course)
which is a FAB thing, if able to afford to do so.

I wish I had known that was an option. Instead of paying huuuge amounts in tax over those years especially as a higher rate tax payer, before an accident meant being medically retired and now drawing on my pension. Very fortunate to have a good company pension and medical retirement scheme therefore an income but probably overall could have been managing things differently to have paid less tax, had bigger pension pot etc n now too late.

There is not enough financial information given out to people. has to be sought, but most people are not in a position to do that, or even think there might be other options than just earn a salary, get charge tax automatically, and pay into pension automatically.

P.s What does HRT stand for?

jem16

emmb wrote: »

P.s What does HRT stand for?

Higher rate tax.

bigadaj

jem16 wrote: »

Higher rate tax.

Hopefully?

colsten

Always keep in mind that it's "immoral" to exercise all your available legal options to minimise the tax you pay.

/sarcasm off

talexuser

emmb wrote: »

I wish I had known that was an option. Instead of paying huuuge amounts in tax over those years especially as a higher rate tax payer, before an accident meant being medically retired and now drawing on my pension.

If you have no earned income, then you can still put max £2880 a year into a SIPP which gets grossed up to £3600 by the taxman. If you are in higher tax that £3600 is added to the £43000 threshold so you save 20% tax on that portion, or even take you out of higher tax if within the £46600 according to adjusted net income if I'm correct in how it's been explained?

You can accumulate the SIPP and eventually take 25% tax free, and if a basic taxpayer by then the 20% tax on the remaining 75% is still ahead of the amount you put in because of the relief.