Tax on interest

Pincher

The new system that started on 6th April 2016 seems to assume the majority are making such tiny interest on 1% accounts, and now 0.75%, that only the very few "fortunate" people will need to file due to interest.

Until Santander halved their 3% interest, it was very possible to hit £1,000, on relatively low deposits, that people actually have, if they can be bothered to open multiple 5% accounts.

Previously, the tax was already deducted, so if you had £1,100 in interest, doing nothing was OK. Now, if you make £1,100 , and you don't file and pay £20 (20% on £100), you are technically in violation. Based on how many people can't be bothered to switch energy, that's the kind of number of how many people that can get into trouble.

I expect they will send out some kind of reminder for people to act because it's year one, when they find the apathy to file is overwhelming.

jenberry

Pincher wrote: »

The new system that started on 6th April 2016 seems to assume the majority are making such tiny interest on 1% accounts, and now 0.75%, that only the very few "fortunate" people will need to file due to interest.

Until Santander halved their 3% interest, it was very possible to hit £1,000, on relatively low deposits, that people actually have, if they can be bothered to open multiple 5% accounts.

Previously, the tax was already deducted, so if you had £1,100 in interest, doing nothing was OK. Now, if you make £1,100 , and you don't file and pay £20 (20% on £100), you are technically in violation. Based on how many people can't be bothered to switch energy, that's the kind of number of how many people that can get into trouble.

I expect they will send out some kind of reminder for people to act because it's year one, when they find the apathy to file is overwhelming.

Thanks Pincher, I find this really interesting. I only stumbled upon a reference to the new way of paying tax through reading an article about p2p lending. However, I imagine there will be many people who haven't heard about this at all. What will happen to them if they don't file their tax return for interest?

Dazed_and_confused

The link in post 4 is worth a look, in short

If you’re a basic rate taxpayer and have savings income or interest of more than £1,000 (£500 for higher rate taxpayers), you’ll have to pay some tax on this. But you don’t need to do anything yet.

HMRC will normally collect the tax by changing your tax code. Banks and building societies will give HMRC the information they need to do this.

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

Eco_Miser

jenberry wrote: »

I have always been very vigilant with my bank statements and have never seen any tax being deducted

You wouldn't see an entry for tax deducted. What you might see is either "net" or "gross" on the interest entry. "Net" means tax has been deducted at the basic rate, "gross" means without deductions.

greenglide

You wouldn't see an entry for tax deducted.

But then you ought to have always got a statement of interest received and tax deducted at the year end.

Presumably this will continue, hopefully with an explanation of what to do if all interest is over £1,000 (or 3500 if a higher rate tax payer.

That would be logical, anyway!

I can see all these notifications of interest to HMRC to the banks going hopelessly wrong. At its simplest, since the bank doesnt necessarily have the customer's NINO, if there is a George Herbert Walker Bush and a George Walker Bush at the same address there is scope for errors when computerised matching is used. It is not as if a real person is going to check.

I think they are assuming that the number of people who receive interest over £1,000 (or £500) will be small. In percentage terms this will certainly be true considering the very low level of savings we are seeing. A reasonable number of the people who do get over £1,000 will already be doing self assessment anyway - I wonder how hard HMRC will look for the rest?

Pincher

jenberry wrote: »

Thanks Pincher, I find this really interesting. I only stumbled upon a reference to the new way of paying tax through reading an article about p2p lending. However, I imagine there will be many people who haven't heard about this at all. What will happen to them if they don't file their tax return for interest?

If I'm HMRC, I would send out a reminder around April 2017.

I am NOT HMRC.

http://metro.co.uk/2016/08/20/help-to-buy-scheme-cant-actually-be-used-for-your-deposit-after-all-6080244/

Essentially, it will only help you to buy if you don’t need help to buy – which kind of defeats the point.


One of these days, if you lose one leg, they will tell you you need to be without two legs to qualify for mobility benefits. And if you cut the good one off, they will disqualify you for deliberate deprivation of mobility.