Declaring Interest for Tax-What is the Mechanism?

Dazed_and_confused

The advantage talexuser has is they are spreading the tax owed out over a long period, delaying telling HMRC or waiting for them to get the info from the banks is gonna mean the tax due for 2 and a bit years is going to payable in a twelve month period.

We're already at the end of year 1 for the new system of no tax at source so by the time the HMRC have heard from the banks and can send the calculation for 2016:17 it will be summer(?) 2017. They might then alter the tax code for 2017:18 to include an estimate of the interest for that year but they have special rules to avoid backdating tax owed to the start of the tax year so code would be done on an emergency basis.

Roll forward to April 2018 and tax code for 2018:19 year will include the tax due for 2016:17, part years tax due for 2017:18 and a restriction for the interest expected to be received during 2018:19 so nearly 3 years tax all in one year!

I know some will prefer this as it is delaying paying the tax but this has to be weighed against the significant hit all in one year.

Newly_retired

So it looks as though those of us who have had to do self assessment will be at an advantage, as we can put in our own figures.

andy_poulton

Hi Talexuser.
Am I right in thinking also that the HMRC wished to double tax you for 17/18 as the asked me to do?

That is the tax on interest earned 16/17 PLUS the tax on interest estimated for 17/18 p[ayable over the next tax year by a amended code.
[Then they said they would NOT amend a code mid year? but levy and then ask for monthly direct debit payments?. They have amended my codes many times mid year]
Very confusing.
Cheers Andrew

bigadaj

andy_poulton wrote: »

Hi Talexuser.
Am I right in thinking also that the HMRC wished to double tax you for 17/18 as the asked me to do?

That is the tax on interest earned 16/17 PLUS the tax on interest estimated for 17/18 p[ayable over the next tax year by a amended code.
[Then they said they would NOT amend a code mid year? but levy and then ask for monthly direct debit payments?. They have amended my codes many times mid year]
Very confusing.
Cheers Andrew

It's probably the interest on account, so exactly what self employed people have had to do for a few years now.

Historically then tax only had to be paid by the following January but Hmrc viewed that as a loss in cash flow and no doubt had a few people who had either spent the tax money or were outraged in getting a demand for teh previous year.

So the assumption has been changed that income for the following year will be the same as the current tax year, and half the tax becomes due in January with the remains in July.

For savings of employed people then this is most easily recovered by amending the tax code and paying an amount every month. Changes to interest earned might result in some initial over or under paying but it will come out in the wash and in theory the online system should be able to be amended very quickly if you know there will be a bug change.

polymaff

Newly_retired wrote: »

So it looks as though those of us who have had to do self assessment will be at an advantage, as we can put in our own figures.

Very much so. I'm staying on self-assessment just so that I know that the figures can be trusted.

And if I muck it up, then at least it is me who is to blame.

polymaff

bigadaj wrote: »

It's probably the interest on account, so exactly what self employed people have had to do for a few years now.

Historically then tax only had to be paid by the following January but Hmrc viewed that as a loss in cash flow and no doubt had a few people who had either spent the tax money or were outraged in getting a demand for teh previous year.

So the assumption has been changed that income for the following year will be the same as the current tax year, and half the tax becomes due in January with the remains in July.

For savings of employed people then this is most easily recovered by amending the tax code and paying an amount every month. Changes to interest earned might result in some initial over or under paying but it will come out in the wash and in theory the online system should be able to be amended very quickly if you know there will be a bug change.

I think that you mean Payments on Account, which was - like income tax itself, and then higher rates of icome tax - only ever meant to affect the very wealthy. Now HMRC have, without due notice, started to extend PoA to all recipients of taxable savings income.

One can, at least at present, get them to modify the assumed figure. Don't expect that "concession" to be arould for too long.

polymaff

andy_poulton wrote: »

Hi Talexuser.
Am I right in thinking also that the HMRC wished to double tax you for 17/18 as the asked me to do?

No, but they want to get tax out of you ASAP.

I took this up with HMRC about a year ago, as it was obvious that stopping tax being collected at source would be a complete reverse of their original policy, and because it would lead to a hell of a big hole in their cash flow as savers would fall into to the very generous process that applies to us self-employed - i.e. we keep all of that tax until the end of the January of the following tax year - and earn money on it during that period. They said they were aware of this and would make an announcement later in 2016. Well, they did, but VERY quietly - and no-one (but me!) seemed to notice it. Now, of course, folk are finding out about it and are screaming.

By the way, those who do use self-assessment better be prepared for another silent announcement, namely that there are about 20 known-of bugs in HMRC's 2016/17 self-assessment software - i.e. the benchmark that decides whether your next self-assessment tax return is mis-computed, rejected and/or leads to your being got at.

You couldn't make it up.

isasmurf

polymaff wrote: »

I think that you mean Payments on Account, which was - like income tax itself, and then higher rates of icome tax - only ever meant to affect the very wealthy. Now HMRC have, without due notice, started to extend PoA to all recipients of taxable savings income.

And how have they done that? Tax on interest will be collected through the tax code as it has been for higher rate taxpayers for many years. Nobody is going to brought into Self Assessment or have a tax demand in January solely as a result of the change in policy in taxation on savings interest. To suggest otherwise is nonsense.

polymaff

isasmurf wrote: »

And how have they done that? Tax on interest will be collected through the tax code as it has been for higher rate taxpayers for many years. Nobody is going to brought into Self Assessment or have a tax demand in January solely as a result of the change in policy in taxation on savings interest. To suggest otherwise is nonsense.

I read nothing in the above that refers to or reflects upon what I actually wrote.

colsten

Newly_retired wrote: »

So it looks as though those of us who have had to do self assessment will be at an advantage, as we can put in our own figures.

Anyone can do a self assessment. You don't need an invitation, a request, or permission from the HMRC