Savings interest tax question

BASmith

I just wanted to check: I am a higher tax rate payer and understand that any interest I receive greater than £500 is liable to be taxed at 40% due to the changes to the tax law last April. However, under the old system prior to this I regularly received statements from the various banks I have saving accounts with stating that I had been taxed at the lower rate of 20%. Am I correct in assuming that the tax office will have adjusted my tax code at that time to recover the other 20% automatically?

Archi_Bald

BASmith wrote: »

Am I correct in assuming that the tax office will have adjusted my tax code at that time to recover the other 20% automatically?

They would have, provided you told them about your savings income, as you were obliged to do.

BASmith

Unfortunately I didn't. What do I have to do now and how far back do I go?

[Deleted User]

Hi,

I thought all savings interest was now paid gross, since April 2016.

teddysmum

[Deleted User] wrote:

Hi,

I thought all savings interest was now paid gross.

As the OP asks how far back they should go, I think they are referring to undeclared interest, paid in past years, but only taxed at 20%, when they were a higher rate taxpayer. (ie not just for the time that savings are paid interest gross.)

BASmith

That's correct. I'm talking about undeclared / paid tax pre April 2016. I want to avoid any penalties for non payment so was wondering what I need to do now to put it right. Submit a self assessment? I have in mind that the tax office can go back 7 years, which will be a nightmare pulling together all the statements for that time period.

Dazed_and_confused

Roughly how much are you talking about?

Were you definitely over the higher rate limit in all the past few years?

Are you affected by the high income child benefit charge (income over £50k and family claiming to child benefit?)

Does your interest take you from under £100k income to over £100k, if only very slightly?

BASmith

Yes I was definitely over the higher rate tax band for the last 7 years and yes I am affected by the child benefit charge.
My income has always been over £50K but always under £100K in that time period. I estimate the savings interest to have been on average about £1500 per year

alanq

If you completed tax returns accurately during each year any additional tax due on savings would have been billed or collected by adjusting your tax code.

If you made tax returns prior to Year Ending 2017 you should have declared the interest as taxed at source.

If you were not asked to complete a tax return you should have contacted HMRC to inform them.

That said I am surprised that HMRC have not contacted you. Many years ago I accidentally forgot to declare a small amount of interest earned on April 6th as I thought I had declared it for the previous tax year. That was spotted by HMRC within a year as banks and building societies do inform HMRC of interest earned and it can be compared with what you tell them you earned.

butterflymum

Did the Annual Interest Statements you 'regularly received...from the various banks', not have a few lines/paragraph to the effect that it was your responsibility, if a higher rate taxpayer, to declare to the Tax office, all earned interest that required to be taxed at 40%? I thought most usually did have some sort of wording to that effect.

BASmith

I've never completed a tax return. I'm PAYE.
As I haven't heard from HMRC maybe they did adjust my tax code to capture the additional tax. Like you say the banks and building societies will have told them about my accounts