Easy to fall into tax now.

mcfly998

Many thanks 2010 - I did see your post, but I wanted confirmation that I had understood correctly. 

Cheers

NannaH

Not if you have no other income, you can earn £18k a year in interest before tax.  

Unfortunately I don’t have £450k in savings 🤣

Dazed_and_C0nfused

mcfly998 said:

On the original subject of the post.

As a, single person, basic rate tax payer, on PAYE.  I now find that I will be one of these people.  I'll be going over the £1000 tax free interest limit, for the first time, next tax year (with ISA allowances maxed). 

My question is:  Do I have to fill in some kind of form to tell HMRC about it???

Or will my banks let HMRC know all my interest incomes for the year automatically? and HMRC then add them all up and adjust my tax code accordingly?  Surely, they can't be that proactive?

 

A basic rate payer could potentially use some of the savings starter rate band before the savings nil rate band (aka Personal Savings Allowance) is used.

For example if your taxable earnings or pension use £3,500 of the basic rate band you will have £1,500 of the £5,000 savings starter rate band to use.  Plus the £1,000 savings nil rate band after that.

david72

2010 said:

Providers provide HMRC with savings interest from the current tax year in July/Aug 2023.
If you owe tax on interest you`ll get a P800 in Oct.2023 and your code will be adjusted the following April 2024 to recover the tax owed.
And yes the taxman will know all about your savings interest.

With savings interest rates (almost) constantly changing now, and everyone bouncing their savings around chasing the best rates, while leaving a few pounds in previous accounts (either in case they become competitive again, or to make it easier to open new accounts (especially loyalty accounts) with that institution in the future), it must be absolutely stacks of fun for HMRC to try to tot up all those pennies of interest in those accounts here, there, and everywhere!

Notepad_Phil

david72 said:

2010 said:

Providers provide HMRC with savings interest from the current tax year in July/Aug 2023.
If you owe tax on interest you`ll get a P800 in Oct.2023 and your code will be adjusted the following April 2024 to recover the tax owed.
And yes the taxman will know all about your savings interest.

With savings interest rates (almost) constantly changing now, and everyone bouncing their savings around chasing the best rates, while leaving a few pounds in previous accounts (either in case they become competitive again, or to make it easier to open new accounts (especially loyalty accounts) with that institution in the future), it must be absolutely stacks of fun for HMRC to try to tot up all those pennies of interest in those accounts here, there, and everywhere!

Maybe a bit of fun for the initial programming team, but I suspect the fun afterwards comes mostly from the tax payers who want to keep a close eye on how much interest they have received.

2010

It`s vital to keep your own tally of interest earned each tax year.
You may not believe this, but sometimes HMRC get it wrong   

Expotter

It's also worth mentioning that your tax code will probably end up wrong for years to come, especially if you move accounts regularly, because HMRC assumes that you continue to earn the same interest from all accounts you've earned interest before, unless you tell them otherwise. In my case I went over the allowance once by about £50, it took years and more than a few phone calls to finally correct it.

steveksullivan

Agreed ..... and for some reason they will even jump back a year to previous figures !

A couple of years ago, having pointed out to them that I had (having paid off mortgage etc etc....) much lower amounts in savings than the previous year .... and also that interest rates had plummeted I got my tax free allowance reinstated for the current year.

The following year they jumped back to the PREVIOUS years untaxed interest figure again and decimated my personal allowance again ..... another phone call!

RG2015

Expotter said:

It's also worth mentioning that your tax code will probably end up wrong for years to come, especially if you move accounts regularly, because HMRC assumes that you continue to earn the same interest from all accounts you've earned interest before, unless you tell them otherwise. In my case I went over the allowance once by about £50, it took years and more than a few phone calls to finally correct it.

I agree that they do this and it can catch you out. However, I have had this issue three years in a row and all it took was a single phone call each time.

Also, if you phone at 8:00 am Tuesday to Wednesday you can usually get through within 5 minutes.