Chargeable Event Gains & Self Assesment

[Deleted User]

Dazed - from your link

The notional tax credit available is equal to 20% of the gain, even where this available credit cannot be fully utilised; hence it is shown in full.

From your example:

Pension Income 20000
CE 1700
Untaxed Interest 300
Total Income 22000

less personal allowance 12500 = 9500 chargeable.
300 a0%, 9200 @ 20% - total due 1840.

less paid 1500 (pension), 340 (CE) - total 1840

And from Jeremy’s Link:

3 The tax credit is deducted from the total tax liability; however it is restricted to the amount of tax actually payable

Jeremy535897

Section 530 ITTOIA 2005 says:

Income tax treated as paid etc.

(1)An individual or trustees who are liable for tax on an amount under this Chapter are treated as having paid income tax at the basic rate on that amount.

(2)The income tax treated as paid under subsection (1) is not repayable.

(3)The amount on which an individual is treated under subsection (1) as having paid income tax is reduced if subsection (4) applies.

(4)This subsection applies if the individual's total income is reduced by any deductions which fall to be made at Step 2 or 3 of the calculation in section 23 of ITA 2007 (calculation of income tax liability) from the part of the income charged to tax under this Chapter.

(5)The reduction under subsection (3) is equal to the amount of those deductions.

(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7)This section is subject to section 531.

In the basic example, with £20,000 taxable income, and £300 interest, the tax liability is £1,500. If you have a chargeable event of £1,700, with a notional credit of £340, you cannot then say that the tax should have been only £200 because of the personal savings allowance, and therefore reclaim £140. This offends subsections (2) to (4). Therefore having the chargeable event treated as savings is only helpful if, for example, it would have otherwise taken the taxpayer above £5,000 of non-savings income.

Mothman

Many thanks for the replies, some of which I must admit  have lost me a bit.

So just to clarify I had calulated my mothers gross income as £21000 and the total gain across the two bonds as £49000 which have both been held for 20 full years. Therefore £49000/20= £2450 + income £21000 = £23450 and so no additional tax to pay as basic rate tax has already been deemed to have been deducted. I just wasn't sure whether even though there is no additional tax due, HMRC would still require my mother to complete a self assesment return?

[Deleted User]

Mothman said:

Many thanks for the replies, some of which I must admit  have lost me a bit.

So just to clarify I had calulated my mothers gross income as £21000 and the total gain across the two bonds as £49000 which have both been held for 20 full years. Therefore £49000/20= £2450 + income £21000 = £22450 and so no additional tax to pay as basic rate tax has already been deemed to have been deducted. I just wasn't sure whether even though there is no additional tax due, HMRC would still require my mother to complete a self assesment return?

No - she is fine. No need for a self-assessment return completion unless in the unlikely event that HMRC issue a notice to file.