Tax on interest.

ipri

Am I right in thinking that any bank / financial institution that pays interest to someone passes this information ( together with tax deduction) , to HMRC? Which means there is no need to keep calling them up to let them know how much we are receiving in any year? thanks

CLAPTON

ipri wrote: »

Am I right in thinking that any bank / financial institution that pays interest to someone passes this information ( together with tax deduction) , to HMRC? Which means there is no need to keep calling them up to let them know how much we are receiving in any year? thanks

it's your responsibility to ensure your tax is correct

ipri

Yes I know that....but do....?

Pennywise

HMRC may receive the info from the banks, but they don't actually routinely do anything with it, so yes, you do have to keep them informed yourself. HMRC only use the information for random/selected cases to make sure that the taxpayer has told them the right information. Quite an impossible task for HMRC to actually process it all themselves when there are 60 million taxpayers, a large proportion of which will have some kind of interest paying bank account, many having several different banks/accounts - a logistic nightmare for them and completely unnecessary since the tax law puts the burden on the taxpayer to make sure that they themselves keep HMRC up to date to keep their tax right.

p00hsticks

I'm no expert but my understanding is that your responsibility is to contact HMRC if you believe that you owe additional tax.

So when considering savings interest, if you are confident that, considering all your income and allowances, you are a basic rate tax payer, then there is no need to contact HMRC, as the right amount of tax will have been deducted by the bank and HMRC will have been told.


However, if some of the interest (or other income such as share dividends etc) takes you into the higher rate tax band then you need to contact HMRC to let them know and they will then ask you for more details.

You can't assume that HMRC will have details of all your taxable income and therefore be able to identify the correct rate of tax you should be paying on savings interest - for example, I don't think that they'll have details of any share dividends you may have received.

agrinnall

p00hsticks wrote: »

...for example, I don't think that they'll have details of any share dividends you may have received.

I can see no reason why they wouldn't have it, as far as I remember when I had a limited company and issued dividends I had to report those to HMRC. Whether they would actually match everything up is another matter.

p00hsticks

agrinnall wrote: »

I can see no reason why they wouldn't have it, as far as I remember when I had a limited company and issued dividends I had to report those to HMRC. Whether they would actually match everything up is another matter.

Sorr, yI'm not convinced - when I had one I can't recall having to report who I paid dividends to back to HMRC (although obviously as a recipient I included them in my own Self assessment) , and gov.uk doesn't mention it

https://www.gov.uk/running-a-limited-company/taking-money-out-of-a-limited-company

Apart from anything else, many shares are now owned via nominee accounts, which I imagine would mean that the company issuing the dividend would not necessarily know the individuals details

bsod

it's no logistical nightmare, these computer things are rather good at adding up, totaling millions of accounts should take seconds.

p00hsticks

bsod wrote: »

it's no logistical nightmare, these computer things are rather good at adding up, totaling millions of accounts should take seconds.

But unless they have ALL the input for every individual then it's a pretty pointless exercise

bsod

if that was the case, then collecting the information would also be pointless.

banks can send out a yearly statement of interest paid for all accounts belonging to an individual, there is no reason why hmrc can't also do that same calculation whether it comes from multiple sources or not, the key is the ni no.

p00hsticks

bsod wrote: »

if that was the case, then collecting the information would also be pointless.

banks can send out a yearly statement of interest paid for all accounts belonging to an individual, there is no reason why hmrc can't also do that same calculation whether it comes from multiple sources or not, the key is the ni no.

Banks can, but can all other sources of taxable income ? In particular, do share platforms let HMRC know what dividends have been paid to individuals ? Banks have to provide the information to HMRC because they are collecting tax from the individuals on behalf of HMRC. But companies/nominee share platforms don't deduct tax from dividends, so there's no tax to hand over and so not the same relationship - [jimmo, can you perhaps shed any light on this ?]

Unless HMRC knows ALL your taxable income, then they're not in a position to be able to say if you owe any higher rate tax on your savings interest or dividends - which is why the onus is on the individual to work this out for themselves (as per the OP's original question).