Tax on savings as a self-employed person

pinkflamingo1965

Hi everyone,

I am a bit confused. I understand that since April 2016 you can earn up to £1000 in interest from bank and building society accounts and not be taxed on it. But I have been looking at my latest tax return and HMRC have added the interest I have earned (under £1000) to my ‘profit from self-employment’ to get a total for ‘total income received’. And then they have taxed me on the basis of ‘total income received’. So they are effectively taxing me on the interest as well as on the profit!?! Or am I missing something?

Any insights would be very gratefully received!

Many thanks in advance.

dunstonh

 I understand that since April 2016 you can earn up to £1000 in interest from bank and building society accounts and not be taxed on it.
If you are a basic rate taxpayer or lower.  Higher rate taxpayers are at £500 and additional rate taxpayers get none.

 But I have been looking at my latest tax return and HMRC have added the interest I have earned (under £1000) to my ‘profit from self-employment’ to get a total for ‘total income received’. 
That is correct.  It is still a form of income.

And then they have taxed me on the basis of ‘total income received’. So they are effectively taxing me on the interest as well as on the profit!?! Or am I missing something?
Check the bandings they have used on the tax calculations.  Just because its included in the income does not mean they automatically put it in the basic rate band.   Look for how they have sliced your income.     
Did the interest take you from basic rate to higher rate?

Dazed_and_C0nfused

If you have used up your Personal Allowance then all savings interest will be taxed but up to £6,000 can be taxed at a 0% rate of tax..

What does your SA302 calculation actually show?

pinkflamingo1965

Hi Dunstonh and Dazed_and_Confused,

Many thanks for your kind responses. I have looked further at the SA302, and it shows that everything was in the basic rate band. I can also see now that they haven’t taxed me on the interest. As you indicated Dunstonh, I was assuming that as they had added it to my income, that they had taxed me on it.

Thanks for the direction. Much appreciated.