Tax on interest from a foreign account

Peggy0628

---

swindiff

As a basic rate taxpayer you can earn £1000 interest per year without having to pay any tax on it.

Peggy0628

---

bowlhead99

As a UK resident you are taxed on your world-wide income. But the savings interest allowance can be used for your interest income from all sources (not just UK banks).

As the amounts are small (less than a few hundred quid), if you had been doing a UK tax return you would be allowed to just lump it in with your other UK untaxed bank interest -the only reason to use the "foreign income" pages of the tax return would be if you had a large amount, or if you'd had foreign tax deducted at source off your interest income and you wanted to offset that foreign tax against your UK tax bill on the same interest income.

If the amount earned in the foreign account when added to your interest in your UK accounts is under your personal savings allowance, and you are not already required to fill out a self assessment tax return for any other reason, you don't need to report the income (or the existence of the account) to HMRC at all. However, if you are already doing a tax return (and therefore need to declare all your income, however small), you should include the £10-20 of foreign interest within the figure you disclose as your UK interest income received gross.

Most foreign banks will share info about interest and account balances of UK residents with HMRC on an annual basis, though there are some rules about when they will actually start doing that depending on the country concerned as it's a relatively new initiative for non-EU banks, and some accounts with small balances like yours will escape reporting if the bank adopts the minimum allowed thresholds to skip reporting - some will, some won't.

So, if your circumstances change and you start to get more interest in future years at home or abroad, and you go over your allowances, make sure you don't 'forget' to declare it ; but if you're under the allowance with no tax to pay you don't need to go to a special effort to write to HMRC.