Paying tax on bank interest .

alfmurph

Never been in this situation just always paid tax by paye .
Retired now with my interest in various bank accounts maturing in may 2023 and may 2024 for a 2 year fix .
Will probably achieve more than the £1000 i am allowed tax free .
1- Will i need to tell the hmrc or will the banks tell them and my tax code changes automatically .
2- Will only make over £1000 in interest if my 2 year fix rates interest is added yearly . Will this happen or does the 2 year fix not get counted until it matures .
Thanks .

Dazed_and_C0nfused

ISA's are tax free.

Non ISA interest is taxable.  Although a combination of the Personal Allowance and two 0% tax bands mean a lot of people don't pay tax on taxable interest until their total taxable income exceeds £18,570.

Have you factored in the savings starter rate band? 

1.  The banks notify HMRC however you have to register for Self Assessment if your interest is £10,000 or more in any tax year.

2.  The interest will be taxable for the tax year the bank reports it to HMRC.

nikal

My wife was on the phone to HMRC she was asked "How much interest did you get last year" my wife had no idea-a few hundred pounds or so?
The HMRC operative on the phone said "You have a lot of accounts don't you" and an instant total was given to my wife. HMRC clearly have all this information to hand already-they don't even need to add it up .It's on the screen!

eskbanker

nikal said:

My wife was on the phone to HMRC she was asked "How much interest did you get last year" my wife had no idea-a few hundred pounds or so?
The HMRC operative on the phone said "You have a lot of accounts don't you" and an instant total was given to my wife. HMRC clearly have all this information to hand already-they don't even need to add it up .It's on the screen!

Not sure what the context of that discussion was but everyone, especially those with multiple accounts, should know (not necessarily spontaneously) how much interest they've earned from taxable accounts, not least in order to be able to challenge HMRC's version of it, which has often been seen to be wildly inaccurate....

calcotti

eskbanker said:

Not sure what the context of that discussion was but everyone, especially those with multiple accounts, should know (not necessarily spontaneously) how much interest they've earned from taxable accounts, not least in order to be able to challenge HMRC's version of it, which has often been seen to be wildly inaccurate....

Completely agree with that. Long exchange of letters with HMRC to get correct tax calculation for last year  because HMRC had added several interest payments from the previous tax year into their calculation. Eventually sorted and they had to pay a refund instead of demanding a payment.

[Deleted User]

Same thing keeps happening to me as well.  HMRC have an annoying practice of bringing forward interest earned in previous years into current or fiscal year.  In my experience, they even bring forward the interest of closed accounts.  I suggest to everyone to keep suitable  records of your interest as HMRC always get it wrong - and I hasten to add, always to your detriment.

[Deleted User]

All banks submit their interest statements by October 31st of each year. Then HMRC calculates how much interest you owe them. Have you thought about putting £50k into Premium Bonds? Whilst there is no guarantee of wins (though I win every month), it is tax free money.