Paying tax on income from savings

Elderone

Which is paid on 1st April every year

badger09

Elderone said:

I had roughly £75 in interest paid on the 1/4/20 which had accrued since I received the inheritance in March. Thanks for all your help and sorry for not being very clear.

1st April 2020 falls in tax year 2019/2020, which ended on 5th April 2020. If you received less than £1000 interest in that tax year, and you're a Basic Rate taxpayer, you have no additional tax to pay.

If you want to ensure that HMRC includes your estimated interest for 2020/2021 in your tax code, I would either write to them or phone them asap. There is no way for HMRC to know at the moment, that you expect to receive £2250 interest during this tax year, so no adjustment to your code will be made based on the information they currently have.

Elderone

Thanks very much. I will ring them. What I didnt want to happen was that if I do ring them that triggers me having to fill out tax returns every year. 

Albermarle

If you have a personal tax account online , I think you can just go in and get it changed that way 

RG2015

Albermarle said:

If you have a personal tax account online , I think you can just go in and get it changed that way 

I have done this in the past but cannot find the link at the moment. Do you know how to do this now?

Albermarle

https://www.gov.uk/personal-tax-account

RG2015

Albermarle said:

https://www.gov.uk/personal-tax-account

Thank you. I do recall now that there is a section within personal tax online entitled "Add income from another source" 

Dazed_and_C0nfused

Elderone said:

Hi everyone 
Can you help please. I inherited some money. The interest I will get from it in my taxable accounts totals roughly £2250. I am employed and thought rightly or wrongly that the banks inform HMRC and they adjust my tax code to take the 20% off the £1250 after discounting my PSA. I would rather not have to fill out a tax return for the sake of paying £500 extra in tax.
Is it normal practise to have to inform the income tax people about an inheritance or is it all sorted out between the banks and them automatically or is it better to ring them?
Thanks

You wouldn't need to complete a Self Assessment return just because of £2,250 in untaxed interest.

If you are a low-medium earner (usually less than £17,500) then the savings starter rate of tax might mean more of the interest is taxed at 0% than just the £1,000 taxed at 0% from the savings nil rate of tax (aka PSA).

Tildaplum

i believe if your other income is less than 12.5k ie the personal allowance you can have 5k of interest tax free but obviously check this.

Dazed_and_C0nfused

Tildaplum said:

i believe if your other income is less than 12.5k ie the personal allowance you can have 5k of interest tax free but obviously check this.

Sort of.  You normally have to have taxable income of at least £18,501 before any tax is actually payable on interest.

Personal Allowance £12,500 (or £11,250 if you have applied for Marriage Allowance)
then
£5,000 taxed at 0% (savings starter rate)
and finally
£1,000 taxed at 0% (savings nil rate)

The £5,000 rate band is reduced pound for pound as you have earnings (or pension, business profits etc) over £12,500 (or £11,250).  So if you have pension income of say £16,000 and haven't applied for Marriage Allowance then you will only have £1,500 savings starter rate.  Plus £1,000 savings nil rate band.