Savings Interest - Self Assessment

Dazed_and_C0nfused

meatandtwoveg said:

Since starting this thread. I've closed lots of accounts with small amounts balances in total.
Up till today, if these totals we're my full tax year totals ending April 5th 2021, would I need to submit a self assessment. As I owe no tax.
Capital Gains on all shares bought and sold= £4800.00 after all buying and selling costs.
Dividends received = £2600.00
Income from Savings interest and employment = £9000.00
I think it's all free of tax?
Sorry but my first year of dealing in shares. A newbie.

None of it is tax free like ISA's are but you may not have any tax to pay.

Do you have any earnings or pension income (or anything else) other than whatever is included with the £9k or have you mentioned everything?

bowlhead99

meatandtwoveg said:

Since starting this thread. I've closed lots of accounts with small amounts balances in total.
Up till today, if these totals we're my full tax year totals ending April 5th 2021, would I need to submit a self assessment. As I owe no tax.
Capital Gains on all shares bought and sold= £4800.00 after all buying and selling costs.
Dividends received = £2600.00
Income from Savings interest and employment = £9000.00
I think it's all free of tax?
Sorry but my first year of dealing in shares. A newbie.

You're correct that it is all free of tax at the moment because you only have £11,600 of income and your standard income tax personal allowance lets you have £12,500 of income without even considering paying tax on it.   So the income is taxable, but there won't be a tax bill.

The capital gains made would all be covered by the standard annual exemption available on the first £12300 of net gains. 

There is no need to submit a self assessment unless HMRC ask you to, and presumably they have not asked you to?

So, no tax to pay. But if you are trying to work out how different types of income is taxed it is not always very useful to pretend the year is going to stop at 20 November and wonder, if it did, whether you would have any tax to pay 'up till today'.  Because the year has not actually ended and you will have several more months in which to earn money or make gains before you actually get to the end of the tax year.

It would be far more useful to estimate what you might receive by 5 April and run the numbers on that, rather than running the numbers on what you have earned 'up till today' when 'till today' is only two-thirds of the way through the year.

meatandtwoveg

bowlhead99 said:

meatandtwoveg said:

Since starting this thread. I've closed lots of accounts with small amounts balances in total.
Up till today, if these totals we're my full tax year totals ending April 5th 2021, would I need to submit a self assessment. As I owe no tax.
Capital Gains on all shares bought and sold= £4800.00 after all buying and selling costs.
Dividends received = £2600.00
Income from Savings interest and employment = £9000.00
I think it's all free of tax?
Sorry but my first year of dealing in shares. A newbie.

You're correct that it is all free of tax at the moment because you only have £11,600 of income and your standard income tax personal allowance lets you have £12,500 of income without even considering paying tax on it.   So the income is taxable, but there won't be a tax bill.

The capital gains made would all be covered by the standard annual exemption available on the first £12300 of net gains. 

There is no need to submit a self assessment unless HMRC ask you to, and presumably they have not asked you to?

So, no tax to pay. But if you are trying to work out how different types of income is taxed it is not always very useful to pretend the year is going to stop at 20 November and wonder, if it did, whether you would have any tax to pay 'up till today'.  Because the year has not actually ended and you will have several more months in which to earn money or make gains before you actually get to the end of the tax year.

It would be far more useful to estimate what you might receive by 5 April and run the numbers on that, rather than running the numbers on what you have earned 'up till today' when 'till today' is only two-thirds of the way through the year.

Your a legend on here Sir....
Thank you for your very detailed but also very unbiased reply.

Many thanks.

meatandtwoveg

New question.
Relating to a family member. 
Will he need to do a tax return, does he owe tax.
Does not work, no pension, no benefits. Only income for this financial year ending April 21 is.
Savings interest. £5700
Dividend income £11000
So in total £16700.
I think he can go to £20500 before he pays tax? Correct me if I'm wrong.
£12500 PA
£2000 Div A
£1000 PSaving A
£5000 Savings no Earnt income allowance.
Thanks for any replies

Dazed_and_C0nfused

Definitely no tax to pay but not quite as you have outlined it.

HMRC may expect them to complete a return as dividends exceed £10,000.

Once the Personal Allowance has been used the income remaining which needs to be taxed is done in reverse order to how you have it.

Savings starter rate is used first.
Then savings nil rate (aka Personal Savings Allowance)
Finally the dividend nil rate (aka Dividend Allowance).

In your scenario I would say £9,000 of the Personal Allowance should be allocated to the dividend income.
Leaving £3,500 against the savings interest.
In turn leaving £2,200 of the interest to be taxed at the savings starter rate (0%).
And £2,000 of the dividends to be taxed at the dividend nil rate (0%).

The £20,500 figure is dependent on income sources, someone employed earnings £12,501 would pay tax.  But with the right mix of income and no application for Marriage Allowance then yes it is possible to have £20,500 taxable income and pay no tax in the current tax year (£20,570 in 2021:22).

meatandtwoveg

Dazed_and_C0nfused said:

Definitely no tax to pay but not quite as you have outlined it.

HMRC may expect them to complete a return as dividends exceed £10,000.

Once the Personal Allowance has been used the income remaining which needs to be taxed is done in reverse order to how you have it.

Savings starter rate is used first.
Then savings nil rate (aka Personal Savings Allowance)
Finally the dividend nil rate (aka Dividend Allowance).

In your scenario I would say £9,000 of the Personal Allowance should be allocated to the dividend income.
Leaving £3,500 against the savings interest.
In turn leaving £2,200 of the interest to be taxed at the savings starter rate (0%).
And £2,000 of the dividends to be taxed at the dividend nil rate (0%).

The £20,500 figure is dependent on income sources, someone employed earnings £12,501 would pay tax.  But with the right mix of income and no application for Marriage Allowance then yes it is possible to have £20,500 taxable income and pay no tax in the current tax year (£20,570 in 2021:22).

Thank you sir. Your a real gent!

meatandtwoveg

*0% starting rate is for savings income only - if your non-savings income is above the starting band level, the 0% rate will NOT apply and the basic rate percentage will be used instead.
Does this non savings income include "Dividend Income"
So for example.
Savings interest income is £6k
Dividend Income is £11k
Total income for year ending 5th April 2021 is £16k.
No other income,no benefits, no pension, no income from work.
Does the 0% starting rate still apply?
I know I've asked before but I just want to make sure I understand before not submittiting a tax return for an elderley relative.

On another not, just as an example, applying the above figures; say he/she had sold a bunch of shares (bought and sold in the same tax year 20/21) No previous tax year losses.
Sold at a £40k profit. Taking off the £12300 Capital Gains allowance, would the gain be taxed at 10% of any gain between £12300 and £46300, then 20% tax rate of any gain after £46300? 
Would the gain have any effect on the £16k income from savings and dividends?
I'm trying to figure out if there is no requirement to submit a tax return for the £16k income, only a Capial Gains submission payment for any gains on sold shares?

Thanks for any help.

Dazed_and_C0nfused

Savings interest income is £6k

Dividend Income is £11k

Total income for year ending 5th April 2021 is £16k.

No other income,no benefits, no pension, no income from work.

Does the 0% starting rate still apply?

Yes. I presume you mean total taxable income of £17k but if you allocate all the Personal Allowance (even if only £11,250 due to Marriage Allowance) to the dividends then the interest of £6k will all fall within the remaining Personal Allowance and the savings starter rate and the savings nil rate.  So no tax to pay. 

Unless they have made Gift Aid donations in which case the tax the charity had claimed back would have to be paid to HMRC by your relative (it is part of the Self Assessment calculation, nothing special needs to be done).

HMRC would expect a return as dividends exceed £10k.

I suspect the income taxed at 0% within the basic rate band would have an impact on the CGT payable.
Low Income Tax Reform Group (LITRG) is a good place to research this type of situation.  Or post on the Cutting Tax board where someone more au-fait with CGT will no doubt reply.

If you are submitting a return you would need to declare everything, you can't just file a CGT page without the other taxable income details.
NB.  You probably can from a literal perspective but HMRC are likely to come calling if you did.

meatandtwoveg

Dazed_and_C0nfused said:

Savings interest income is £6k

Dividend Income is £11k

Total income for year ending 5th April 2021 is £16k.

No other income,no benefits, no pension, no income from work.

Does the 0% starting rate still apply?

Yes. I presume you mean total taxable income of £17k but if you allocate all the Personal Allowance (even if only £11,250 due to Marriage Allowance) to the dividends then the interest of £6k will all fall within the remaining Personal Allowance and the savings starter rate and the savings nil rate.  So no tax to pay. 

Unless they have made Gift Aid donations in which case the tax the charity had claimed back would have to be paid to HMRC by your relative (it is part of the Self Assessment calculation, nothing special needs to be done).

HMRC would expect a return as dividends exceed £10k.

I suspect the income taxed at 0% within the basic rate band would have an impact on the CGT payable.
Low Income Tax Reform Group (LITRG) is a good place to research this type of situatiThank youpost on the Cutting Tax board where someone more au-fait with CGT will no doubt reply.

If you are submitting a return you would need to declare everything, you can't just file a CGT page without the other taxable income details.
NB.  You probably can from a literal perspective but HMRC are likely to come calling if you did.

Thank you very much sir.