Personal saving allowance: Do you still need to declare bank interest on a Self Asses

littly_kitty

The Personal Saving Allowance means that the first £1000 of bank interest is tax free.

The Self assessment guidance says the following:

(Page TRG 7)

You must include in your return the interest you receive on bank, building
society and other savings accounts, and on loans, unless it is specifically
non-taxable. You must include interest in kind here.

So does that mean you no longer have to declare the interest (because the personal saving allowance means it’s no longer taxable)?


But then the gov.uk page on the Personal Savings Allowance says the following:

7. If you fill in a Self Assessment tax return you should carry on doing this as normal.

So does that mean you do have to declare it, because that would be the normal thing to do?

Thanks!

Nick_C

My understanding;

Interest on savings is specifically non taxable if it is an ISA.

If it is in most other types of savings accounts, it is taxable.

Whether or not you will have to pay tax on it depends on whether it exceeds your taxable allowance.

So for self assessment, unless it is in an ISA or some other tax exempt account, declare it. If you pay basic rate tax and your interest is less than £1K, you won't pay tax on it.

littly_kitty

Thanks. I see. You still have to declare it, you just won't pay tax on it (If you pay basic rate and the interest is less than £1k).

Thanks for clearing that up!

polymaff

littly_kitty wrote: »

.. So does that mean you no longer have to declare the interest (because the personal saving allowance means it’s no longer taxable)?

No allowance can convert income from being taxable to non-taxable. The allowance just alters the rate of taxation - in this case from 40% or 20% to 0%

And "taxable at 0%" is NOT the same as "tax-free" - as many will soon be distressed to learn.

xylophone

Thanks. I see. You still have to declare it, you just won't pay tax on it (If you pay basic rate and the interest is less than £1k).

https://www.gov.uk/apply-tax-free-interest-on-savings/how-much-tax-you-pay

You’ll pay tax on any interest over your allowance at your usual rate of Income Tax.

If you’re employed or get a pension, HMRC will change your tax code so you pay the tax automatically.

If you complete a Self Assessment tax return, report the extra interest there.

mgdavid

Worth saying that the Personal Savings Allowance only took effect from 6 April 2016, i.e. for the current tax year which hasn't ended yet. The institutions only started paying interest gross from that date.
If you are doing a Self-assessment for 2015-16 then your bank interest will have been taxed at source and you declare the net-of-tax amount just as you did the previous year. HMRC gross it up and add it into their calculations but you won't pay any extra tax on it unless your total income puts you into the 40% tax bracket.

polymaff

mgdavid wrote: »

If you are doing a Self-assessment for 2015-16 then your bank interest will have been taxed at source and you declare the net-of-tax amount just as you did the previous year. HMRC gross it up and add it into their calculations but you won't pay any extra tax on it unless your total income puts you into the 40% tax bracket.

Actually, unless your Taxable non-Savings Income plus your Taxable Savings Income puts you into the 40% tax bracket.

mgdavid

polymaff wrote: »

Actually, unless your Taxable non-Savings Income plus your Taxable Savings Income puts you into the 40% tax bracket.

How is that different from 'total income'?

polymaff

mgdavid wrote: »

How is that different from 'total income'?

Dividend Income

mgdavid

polymaff wrote: »

Dividend Income

OK - but do people still have that, other than inside a SIPP or an ISA?

polymaff

mgdavid wrote: »

OK - but do people still have that, other than inside a SIPP or an ISA?

You know that they may do, David.

Don't panic. It's not a hanging offence to make mistakes on MSE.

Or is it?

So, for 2015/16, Dividend Income can push you into being a higher rate tax-payer - but it won't mean more tax on the Taxable Savings income until the Dividend Income is well over £50k

Not so straightforward this year - in that as little as £1 of Dividend Income can result in more tax to pay on a given amount of Taxable Savings income - even if that £1 is, itself, taxed at 0% !

And this is supposed to be the Age of Tax Simplification :rotfl: