Tax on interest

ikon66

So with interest rates rising what’s the situation on paying tax on interest earned over £1000 pa. Is it as simple as just contacting HMRC or will you be expected to start doing self assessment every year? Any advice appreciated. Thanks 

2010

Do nothing, the tax people will get the info from the various savings providers and adjust your code if needed.

Just to add, keep a record of all interest you get each tax year to compare to what the tax office gets.

jaypers

There can be reasons to settle any outstanding tax as a lump sum payment rather than via your tax code. All gets a bit complex and depends on personal income and circumstances but a reduction in personal allowance can have other consequences. 

Dazed_and_C0nfused

Don't forget for plenty of people there is the Personal Allowance and savings starter rate of tax (0%) to use before the savings nil rate (aka Personal Savings Allowance) is even available to be used.

Bigwheels1111

From speaking with HMRC about it, l think it works like this.
Tax allowance is about £12.5k, if you earn less than £17.5k the extra £5K can be tax free interest, Plus your £1000 tax free.
Might not be quite right.

If interest is over 10k you need to fill out a tax return but might not owe any tax if total is less then £18.5k.

ikon66

Thanks all, due to being on a works pension I’m below the £17.5k. Certainly not over £10k (I wish) 

Dazed_and_C0nfused

ikon66 said:

Thanks all, due to being on a works pension I’m below the £17.5k. Certainly not over £10k (I wish) 

So the £1,000 won't be of use to you.

You will have the £5,000 savings starter rate (0%) to use first.

RG2015

Dazed_and_C0nfused said:

ikon66 said:

Thanks all, due to being on a works pension I’m below the £17.5k. Certainly not over £10k (I wish) 

So the £1,000 won't be of use to you.

You will have the £5,000 savings starter rate (0%) to use first.

You often say this, but does it matter which 0% rate you use first?

Dazed_and_C0nfused

You don't have a choice, it's set in legislation.

Personal Allowance has to be used first

Then savings starter rate (if available)

And only once those have been exhausted can the savings nil rate be used.

Just to complicate things you can (or HMRC should) allocate the Personal Allowance in such a way as to get the smallest overall liability.

But that's another level of complexity!

RG2015

Dazed_and_C0nfused said:

You don't have a choice, it's set in legislation.

Personal Allowance has to be used first

Then savings starter rate (if available)

And only once those have been exhausted can the savings nil rate be used.

Just to complicate things you can (or HMRC should) allocate the Personal Allowance in such a way as to get the smallest overall liability.

But that's another level of complexity!

Thank you, and I do understand, but it feels like semantics.

Most people with income less than £17,570, are probably not concerned whether they use their savings nil rate or their savings starter rate.

All that matters is that they don’t pay any tax on their savings interest.

What_time_is_it

I have savings in joint accounts - some in my name, some in partner's name, and some in joint names. We are both in full-time employment. Do we get £1,000 of interest tax free per year EACH? And how is this applied to interest earned in joint names?