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

Dazed_and_confused

Well according to part 7 of this information from gov.uk they do get data from banks.

https://www.gov.uk/government/publications/personal-savings-allowance-factsheet/personal-savings-allowance

But irrespective of that it still all needs to be declared on a tax return when completing one.

david78

The "Personal Savings Allowance" isn't an allowance at all. Its a zero-rate tax band for savings interest (for savings outside an ISA and certain other savings like index linked certs).

You have to add all up your income (earned income, pension income, savings interest, dividends etc.). You then need to subtract any grossed-up payments into a pension.

If you are a basic rate payer the 0% band is £1000. If you are a higher rate payer it is £500. If you are an additional rate payer it is £0.

Individuals are responsible for working out if they are paying the correct tax and informing HMRC if not. This is why its called "Self Assessment".

Dazed_and_confused

The really complicated bit, for some not all, is that you can end up being taxed purely at the 0% rate on your savings income but still have a bigger tax bill than without the interest.

An elderly male, married, basic rate male pensioner could have £1,000 interest all taxed at 0% by virtue of the PSA but have a tax bill £50 more than they would have had without the interest.

High earning employee could have £500 taxed at 0% and have a tax bill £100 more than they would have had without the interest.

Tax doesn't have to be taxing but is is at the moment!!

badmemory

pavane wrote: »

HMRC don't get interest information from banks, at least not for the purposes of tax assessment, why would it be any different for a pensioner?

You should check this with your bank - you will find that you are not correct. The P60 type info you get from your bank at the end of a financial year is also sent to HMRC.

Pennywise

badmemory wrote: »

You should check this with your bank - you will find that you are not correct. The P60 type info you get from your bank at the end of a financial year is also sent to HMRC.

But they dont use it as a matter of routine. They only use it to check a tiny proportion of taxpayers have properly declared it. The onus is very much on the taxpayer to tell hmrc if they have a tax liability resulting from the interest. The system is changing once SA returns are scrapped for most people and personal tax accounts take over as then there will be automatic data feeds from major banks etc.

badmemory

They have stopped me filing SA from now on & when I queried it they told me that the interest I have been declaring they will get direct from the banks. Not that I would actually trust them to get it right (perhaps I shouldn't have told them that).

As I am sure what they do will be sent in the least understandable possible way I strongly suspect I may end up filing SA regardless of what they say.

ETA they told me the interest figures will go onto my personal tax account automatically.

polymaff

Dazed_and_confused wrote: »

The really complicated bit, for some not all, is that you can end up being taxed purely at the 0% rate on your savings income but still have a bigger tax bill than without the interest.

An elderly male, married, basic rate male pensioner could have £1,000 interest all taxed at 0% by virtue of the PSA but have a tax bill £50 more than they would have had without the interest.

High earning employee could have £500 taxed at 0% and have a tax bill £100 more than they would have had without the interest.

Tax doesn't have to be taxing but is is at the moment!!

Ditto with dividends. You might be paying 0% on, say, £1k of dividends - but a coincidental push into high-rate territory results in an apparent tax rate of 10%.

All down to HMRC's unimaginative implementation of PSA.

Goldenyears

Pennywise wrote: »

But they dont use it as a matter of routine. They only use it to check a tiny proportion of taxpayers have properly declared it. The onus is very much on the taxpayer to tell hmrc if they have a tax liability resulting from the interest. The system is changing once SA returns are scrapped for most people and personal tax accounts take over as then there will be automatic data feeds from major banks etc.

Wouldn't automatic data feeds from banks to HMRC need National Insurance Numbers to minimise data matching errors. Not every institution I save with has mine, and no sign of asking for it.

Pennywise

Goldenyears wrote: »

Wouldn't automatic data feeds from banks to HMRC need National Insurance Numbers to minimise data matching errors. Not every institution I save with has mine, and no sign of asking for it.

Which is one of the many reasons why taxpayers will still have to check whatever HMRC eventually start to include on their personal tax accounts. It'll never be foolproof. Another issue is joint accounts - how much HMRC know what proportion of interest should be allocated to each of the joint account holders? Then what about people who receive interest from organisations other than banks who don't currently report interest to HMRC. Hopefully it will work for the majority of people who have simple bank accounts, but a lot of people will still have to update their online tax accounts themselves to make it correct.

polymaff

HMRC's triumphalist "the end of self-assessment" line is a fraud.

The effect of SA 100 "pre-population" will be that taxpayers will have to spend even more time checking for institutional incompetence.

And if HMRC's history in writing working SA software is anything to go by, the incompetence will not be a short-term issue.