April 2016 £1000 interest free

savings_my_hobby

bowlhead99 wrote: »

Correct. The majority of people will not owe any tax on their interest and the banks will do you a favour by not withholding any.

If you earn enough interest to pay tax on it - more likely for a higher rate taxpayer who is perhaps more likely to be doing a tax return anyway - you have to tell HMRC and pay up (in cash or by having an adjustment to your PAYE code going forward). Just as high rate taxpayers - who owe 40% but are only deducted 20% by the banks - do at the moment.

Banks have your name, date of birth and NI number and can report to HMRC on the amounts of interest they pay to you over the course of a year. So, while HMRC will not be working out everybody's grand total interest for them and sending you a demand for what you owe from your umpteen bank accounts, you are expected to know what you have been paid and own up to it. They can certainly pick on anyone they please and check whether what (if anything) you reported via self assessment was in any way consistent with what the banks said they paid you.

It fits neatly into the UK concept of a self assessment of taxes owed and the to-be-implemented-in-due-course online running tax accounts.

At the moment, base rates are on the floor but high interest current accounts like the Santander ones pay a big multiple of the base rates to attract customers. As the base rates rise, the premiums that banks pay over base rate will probably fall a bit and so people's interest incomes will not rise too fast. But in the long term when we have a generally higher level of interest rate in the country we will probably find more people tipping over into the range where they need to declare income and pay tax on some of the income they've been getting.

Would like to add that not only would it be dishonest to not own up upon exceeding the £1000/£500 limit you most probably will get hit with a fine by HMRC if/when they find out. The penalty for a late Tax return is £100, i'd guess the fine would be similar to that, this fine would wipe out at least one accounts worth of annual interest and defeat the point somewhat, plus we only have to pay tax on interest earnings over the allowance which is likely to be less tax than we pay now. I was so pleased when Osborne announced this in March.

Not that anyone on here is advocating dishonesty just thought it was worth adding.

Uneducated_Archie

Thanx for all your replies.

Currently the wife and I have 18 savings accounts (not counting ISAs). I'll have to start keeping records as up until now I've really NOT bothered because the money was paid with tax removed.

colsten

Uneducated_Archie wrote: »

Currently the wife and I have 18 savings accounts (not counting ISAs). I'll have to start keeping records as up until now I've really NOT bothered because the money was paid with tax removed.

Seeing the interest amounts (and rates?) of savings accounts written down in a single place might be an eye opener.

Arthurian

NectarCollector wrote: »

That's true for this tax year (2015 - 2016) but for the next tax year (2016-2017 onwards) it will be automatic

This might be what is being referred to:-
https://www.gov.uk/apply-tax-free-interest-on-savings/tax-free-savings

Getting a refund on some of your interest
You could get a refund during the 2015 to 2016 tax year if all of the following apply:

1. you already have details of your total taxable income including savings interest
   
2. your total income is more than £15,600
   
3. the amount that’s not from savings interest is less than £15,600

When you have your final figures for the 2015 to 2016 tax year, fill in form R40 and send it to HM Revenue and Customs (HMRC).

theGrinch

seems a whole load of complexity when 20 billion is loss from the FTSE 100 companies using offshore havens.

as chancellor I would tax savings at 10p

mgdavid

theGrinch wrote: »

seems a whole load of complexity when 20 billion is loss from the FTSE 100 companies using offshore havens.

as chancellor I would tax savings at 10p

1. source? (don't say the Daily Mail...)
2. thank goodness you aren't, I prefer the present one

polymaff

Arthurian wrote: »

This might be what is being referred to:-
https://www.gov.uk/apply-tax-free-interest-on-savings/tax-free-savings

Which you then incorrectly interpret.

For 2015/16, for the great majority, imagine your gross total taxable income as a column where your dividend income is the upper part, your taxable savings income is the middle part and your remaining taxable income is the lower part. Now draw a line across the column at £15,600. The taxable savings income below this line is that which will be taxed at 0%

bowlhead99

mgdavid wrote: »

theGrinch wrote: »

seems a whole load of complexity when 20 billion is loss from the FTSE 100 companies using offshore havens.


as chancellor I would tax savings at 10p

source? (don't say the Daily Mail...)

There are a lot of people blaming large companies and wealthy people for the woes of the world; the politics of envy. The Mail will moan about fatcats and they'll moan about immigrants and people on benefits - anything for a sensational headline that their readers will lap up.

I don't think there is any doubt that FTSE100 companies attempt to structure their affairs for maximum tax efficiency. I certainly structure my own affairs for efficiency where I can ; preferring to take pension and a lower salary, make use of my ISA allowances, etc. Maybe make tax-incentivised riskier investments. Other people will do things like put joint cash and investments in their wife's name because her income gets taxed in a lower tax bracket, sacrificing joint control to get an overall better result for the household. Other people will cut their working hours or move countries because they don't like the amount of tax they are paying.

Obviously, the people who are in the best position to do these things are those with more money and more scope for planning because they are not living hand to mouth. But then, as they are paying larger marginal tax rates and bearing most of the weight of the government budget on their own shoulders, it stands to reason that it's worth looking in to how to save some here and there. Maybe if you taxed them a flat 10% instead of 40%+, they would have less incentive to look for allowances.

I do find it a bit surprising that people think that moving to a system where you can get the first £x of interest income (or dividend income, for that matter) without suffering tax on it, and then simply pay the tax on any extra amount you get above the generous level, is 'too complicated'. All they are trying to do is help the people who only have a bit, keep more of it, while continuing to tax the people who have a lot. A flat rate for all would certainly be much more welcomed by the rich, but it's not going to fly with Joe Public.

In some sense it is also surprising that people would denigrate 'corporations' who provide employment, buy products, organise capital, and go out and actually produce something useful with it, and say that these people should pay huge taxes as punishment for producing something useful... while they also say that someone who just sits back and earns an income from Santander sending him £60 a month while his cash sits in an instant access bank account doing nothing and takes no risks, should get his 'earnings' tax free.

But really it's not surprising, because if you asked most people they would people feel they are the sort of person that should be paying less tax because they are a good guy and everyone else should pay more tax because they are the bad guys. Like I said, politics of envy.

Roland_Flagg

Slight OT, but if you are out of work and living off your savings and have registered your non-ISA accounts with a R85 form, how much are you allowed to get in interest a year without paying tax?
Will it be your personal allowance plus £1K?

DragonQ

bowlhead99 wrote: »

There are a lot of people blaming large companies and wealthy people for the woes of the world; the politics of envy. The Mail will moan about fatcats and they'll moan about immigrants and people on benefits - anything for a sensational headline that their readers will lap up.

I don't think there is any doubt that FTSE100 companies attempt to structure their affairs for maximum tax efficiency. I certainly structure my own affairs for efficiency where I can ; preferring to take pension and a lower salary, make use of my ISA allowances, etc. Maybe make tax-incentivised riskier investments. Other people will do things like put joint cash and investments in their wife's name because her income gets taxed in a lower tax bracket, sacrificing joint control to get an overall better result for the household. Other people will cut their working hours or move countries because they don't like the amount of tax they are paying.

Obviously, the people who are in the best position to do these things are those with more money and more scope for planning because they are not living hand to mouth. But then, as they are paying larger marginal tax rates and bearing most of the weight of the government budget on their own shoulders, it stands to reason that it's worth looking in to how to save some here and there. Maybe if you taxed them a flat 10% instead of 40%+, they would have less incentive to look for allowances.

I do find it a bit surprising that people think that moving to a system where you can get the first £x of interest income (or dividend income, for that matter) without suffering tax on it, and then simply pay the tax on any extra amount you get above the generous level, is 'too complicated'. All they are trying to do is help the people who only have a bit, keep more of it, while continuing to tax the people who have a lot. A flat rate for all would certainly be much more welcomed by the rich, but it's not going to fly with Joe Public.

In some sense it is also surprising that people would denigrate 'corporations' who provide employment, buy products, organise capital, and go out and actually produce something useful with it, and say that these people should pay huge taxes as punishment for producing something useful... while they also say that someone who just sits back and earns an income from Santander sending him £60 a month while his cash sits in an instant access bank account doing nothing and takes no risks, should get his 'earnings' tax free.

But really it's not surprising, because if you asked most people they would people feel they are the sort of person that should be paying less tax because they are a good guy and everyone else should pay more tax because they are the bad guys. Like I said, politics of envy.

Suggesting richer people should pay more tax than poorer people isn't "politics of envy". It's sensible.

Suggesting that large corporations should pay what they actually owe in terms of tax, because at the moment most of them pay nowhere near what they are meant to, is not the same as saying they "should pay more tax". You paint these corporations as shining beacons of society and suggest that everyone else is just envious of their billions...well yes, because a lot of those billions were earned because of favourable tax (and other) policies, which were in turn gained by exploiting the political system via donations. It's a vicious cycle whenever money can influence politics, and it's the reason that income inequality continues to grow. We don't have it as bad as the US but it's still a problem. Doing things like forcing businesses to pay a living wage evens things out better than subsidising low-level workers' pay using taxes. I'm sure many right-wing politicians would argue that increasing the minimum wage will stifle the economy but this hasn't been demonstrated.

Surely we should be aiming for less income inequality over time? Asking huge corporations to pay more tax (in terms of percentage) than the average blue collar worker is not fantastical or unreasonable. Also remember that the current system hugely favours giant companies over small businesses, who have a much harder time "hiding" their income for tax purposes.

I've been fairly surprised with some of the Tories' policies in this arena but it seems more like a "this'll shut them up for a while" package rather than them trying to seriously change society for the long term. The living wage is one of the better policies but even that doesn't apply for under-25s.