still confused £1000 tax free interest on savings

zagfles

Supercar wrote: »

Interesting response from you and many others. Nice to know I am not alone in confusion. NI number logged against all accounts would help HMRC coordinate bank reports but will they then issue a new tax code every time they get additional interest report for somebody already over £1000. Those on monthly interest deals may then be swamped with code notifications.

Do you think that happens now with accounts that pay gross interest, for instance National Savings Income bonds? They are paid gross, monthly, to everyone. Those who earn enough to pay tax have to declare it. Similarly every higher rate taxpayer has to declare every pound of interest they earn.

What usually happens is the tax code is adjusted on an estimate of interest earned, and corrections are made at the end of the tax year.

Why is it people think this is a new problem which will cause all sorts of issues? It's a problem that's been here donkey's years and which the new rules will make better not worse.

polymaff

colsten wrote: »

...

I think that the concepts of the SRA, PSA and DA are excellent - but the way the SPA has turned out is flawed. Flawed because at the 20/40% border the incremental tax rate is 10,000%. Flawed because the long-time basis of calculating income tax in three independent steps has been trashed by the PSA. What is odd is the switch in philosophy of pressure on the financial institutions to pay more interest nett to a firm decision to abolish nett interest.

The transition from annual tax settlement to pay-as-you-go will be very interesting!

polymaff

Nationwide8 wrote: »

Hmm Thanks for the answers,interesting...my income from salary/pension was about £10700 2015-2016 but I did pay some tax on that so ( I assume) am due a rebate after April 2016.

Not if your Personal Allowance was the standard £10,600. If so tax was due on your 2015/16 salary/pension irrespective of any savings or dividend income

Nationwide8 wrote: »

1. But if I was earning more than £ 16000 ( or whatever it is in 2016 -2017 ) and had more than £1000 in interest I'd be worrying about the HMRC chasing me unless I filled in a self assess form....even if the idea is they "automatically" will somehow get overpaid interest back.

I mean where do they plan to automatically get it from ??? Direct from the person ? Via a letter demanding payment ?

2. ...and will HMRC know if you earn more than £1000 interest from multiple banks and not just one ?

3. ...Will they chase people who earn above what's allowed and say earn £1400 in interest...Chase them for 20% of £400 ie £80 ?

1. I repeat, it is your duty to pay all tax due, when due. Miss out and you'll be fined, charged interest and, maybe, penalised

2. Yes

3. Yes. They chase people who actually owe nothing - for the £100 fine for not declaring the circumstance.

polymaff

zagfles wrote: »

Is this really true? Now, every higher rate taxpayer who earns even a few £ interest is legally required to declare that interest and pay additional tax on it.

Yes. It has always been the tax-payers' responsibility to inform HMRC of liabilities to unpaid tax. That won't change.

Nationwide8

polymaff wrote: »

Not if your Personal Allowance was the standard £10,600. If so tax was due on your 2015/16 salary/pension irrespective of any savings or dividend income

So if my salary/pension combined for 2015/2016 was ( will be ) £10700 and my PA is £10600 .... my tax liability is only on £100 ? Correct ?

polymaff

colsten wrote: »

there is nothing to worry about a self assessment - it takes 10 minutes to fill in if your only income is from employment/pension and savings. But there is talk about HMRC collecting the money via adjustments to the tax code. Just sit tight until the details will be revealed.

Agreed - until the "Death of the SA Return", the online submission of a short SA return is very straightforward. After the DotSA, it should be even easier to interact with HMRC via your own digital tax account (cough, cough).

As for coding out sums owing, this is a regular procedure used by HMRC - providing Payments on Account or limits to the coding adjustment don't apply

polymaff

Nationwide8 wrote: »

So if my salary/pension combined for 2015/2016 was ( will be ) £10700 and my PA is £10600 .... my tax liability is only on £100 ? Correct ?

On your salary/pension, yes, basic rate on £100, i.e. £20. You'll then also be eligible for £4,900 of SRA - see my previous.

polymaff

FOREVER21 wrote: »

I am also interested to find out whether HMRC will expect an individual to contact them if they exceed the £1000 figure or if they will just send out a notification and adjust the tax code. I realise SA when only pension and interest is involved would take a limited amount of time but for me I would prefer not to have to complete more forms( even online).

"Coding out" by HMRC is an accepted way of collecting tax owed - but it is only used where the sum owing doesn't trigger the Payments-on-Account regime, or exceeds limits (typicaly, low thousands) set by HMRC

Nationwide8

polymaff wrote: »

On your salary/pension, yes, basic rate on £100, i.e. £20. You'll then also be eligible for £4,900 of SRA - see my previous.

So I paid MUCH more in tax 2015-2016 than £20 ( and all told my income less than £15600 ) ...so should I not automatically receive a rebate after April 2016 ???

JethroUK

I'm still trying to figure how this benefits /effects the coffers because it seems more like an exercise in justifying the job role of tax administration and even justifying an increase in administration staff and budget for the same
Can't the UK government afford a decent computer???