Savings Interest on Self Assessment Forms

nheather

Everyone has a Personal Savings Allowance, the size varies depending on which tax band you are in, this means that you don’t pay tax on interest earned up to your Personal Savings Allowance.

For example I am in the higher tax band which means that I can earn up to £500 interest tax-free.

My question is how do you deal with this in a Self Assessment Tax Return.  Imagine that I had received £250 in interest for that tax year, so we’ll within my personal allowance.

When it comes to the tax entry on the Self-Assessment form, there are two boxes to complete

1. Interest that has been taxed
2. Interest that has not been taxed

So what would I do with my £250 interest.

Do I not declare it at all because it is within my Personal Savings Allowance
Do I declare it under tax paid
Do I declare it under tax not paid

I am concerned that if I get this wrong I will end up being taxed on it.


The guide on the form did not help and I’d lose the will to live if I tried telephoning HMRC.

Dazed_and_C0nfused

There is no "allowance" specifically for interest.

So you will be taxed on it.

But for a higher rate payer the first £500 is taxed at 0%.

It is still taxable income and forms part of your adjusted net income so can impact things like HICBC and tapered Personal Allowance.

Unless tax has been deducted at source by the interest payer (rare but not impossible) you would enter it in the untaxed interest field. 

[Deleted User]

Hi,

if you received it gross, not taxed, you declare it as interest not taxed.

nheather

frugalmacdugal said:

Hi,

if you received it gross, not taxed, you declare it as interest not taxed.

The problem is I'm not convinced that the form accounts for the allowance.  You can take the form so far and see the calculation to see what it does and then back out.

If I put it in as taxed, you can see the calculation grosses it up (by 40%) and then takes off the 40% - so you end up with the right calculation but not for the right reason.

But if you put it in as untaxed, it doesn't gross it up and then removes 40% - so you are effectively taxed at 40% on the interest even though you are within the interest-free range.

To get the correct calculation you either have to not declare it at all or to declare it as taxed.

diystarter7

Hi

It is groos interest, put in the gross, the calcualtion once you have completed the SA towards the end will give you a breakdown - you do not need to send the SA to the taxman at that stage. I completed one for one of our kids a few days ago  and i think its slightly changed from when I did 4 around April 2022.

so test the SA, and get the calculations and if you ar happy and it looks correct, send it to HMRC

The breakdown of figures in depth/detailed, never noted them before but it is possibly I dont bother but the sign 'BETA' is always on the site so they are always updating etc I guess

Thanks

Dazed_and_C0nfused

nheather said:

frugalmacdugal said:

Hi,

if you received it gross, not taxed, you declare it as interest not taxed.

The problem is I'm not convinced that the form accounts for the allowance.  You can take the form so far and see the calculation to see what it does and then back out.

If I put it in as taxed, you can see the calculation grosses it up (by 40%) and then takes off the 40% - so you end up with the right calculation but not for the right reason.

But if you put it in as untaxed, it doesn't gross it up and then removes 40% - so you are effectively taxed at 40% on the interest even though you are within the interest-free range.

To get the correct calculation you either have to not declare it at all or to declare it as taxed.

You are completely wrong.

No one has ever had 40% tax deducted from interest, you are misunderstanding the concept.  It is referring to tax deducted at source.  Which is rare now.

If you check the calculation (which you can do before submitting the return) you will see how the interest has been taxed.

There is no "allowance" though.  If all the Personal Allowance has been used then interest will be taxed at one of more of the following dates.

0%
20%
40%
45%

xylophone

 If all the Personal Allowance has been used then interest will be taxed at one of more of the following dates.

See post below.
In this person's case, there was not even enough  non savings income  to use up the personal allowance but HMRC's utter incompetence/systems caused tax to be deducted....


https://forums.moneysavingexpert.com/discussion/comment/79585658/#Comment_79585658

[Deleted User]

The best advice is to enter the interest in the correct place (gross interest) and view your calculation to see how it has been treated. 

[Deleted User]

Hi,

what does your annual statement from provider say, usually issued after 5th April,

eg: Date    Gross Int     Tax Deducted     Amt Rcvd.