LISA - does bonus need to be declared as taxable interest on tax return or for tax credits purposes?

ffurdoow

I got a 25% bonus of around £1k on my LISA (lifetime ISA) a year or so ago, and as my HMRC tax return for self assessment is approaching, I am confused as to if I need to declare it on there. I'm pretty sure I don't. It also affects my tax credits if it's taxable interest, so need to check for this purpose if it needs declaring or not? Once I called tax credits and they were very confused and told me I should declare it as taxable income but I think I spoke to someone cluless who gave me wrong information. Thanks

eskbanker

Anything to do with ISAs is off limits for HMRC tax purposes....

Not so familiar with rules around tax credits but https://www.gov.uk/guidance/tax-credits-working-out-income#other-income seems reasonably clear about interest, so the bonus should be seen the same way:

Saving and investment income

Include the amount before tax is taken off. Do not include interest from tax-exempt investments like Individual Savings Accounts.

NottinghamKnight

eskbanker said:

Anything to do with ISAs is off limits for HMRC tax purposes....

Not so familiar with rules around tax credits but https://www.gov.uk/guidance/tax-credits-working-out-income#other-income seems reasonably clear about interest, so the bonus should be seen the same way:

Saving and investment income

Include the amount before tax is taken off. Do not include interest from tax-exempt investments like Individual Savings Accounts.

That's interesting, savings in a cash isa for example would typically be taken into account when applying for benefits, but we obviously have had the situation where people have contributed so much into pension contributions, from higher rate tax levels, whereby the have qualified for tax credits. The system is very (too) complicated. 

ffurdoow

Thank you so much both for input.

calcotti

NottinghamKnight said:

That's interesting, savings in a cash isa for example would typically be taken into account when applying for benefits, 

That is generally true for means tested benefits but Tax Credits are/were the exception. They are being phased out and new claims cannot be made. There are of course some benefits that are not means tested at all.