Self Assessment & Savings Tax

dosh37

It's April again and time for the dreaded annual Self Assessment. This tax year I have held something like 22 different online savings accounts. I often open new accounts and move money to maximise interest while keeping below the £85K FSCS limit. Cynergy, for example, do not increase the interest rates on existing savings accounts so I often end up closing an account and opening a new one. Keeping track of the total interest received for tax purposes during the financial year is extremely difficult. I have an Excel spreadsheet that helps but it's easy to make mistakes.

It used to be relatively simple when we received Tax Certificates through the post. This no longer happens. Most savings organisations do not supply Tax Certificates or Statements via email following account closure. In many cases when you close an online account you are subsequently unable to even login to obtain statements etc.

Interest from fixed term accounts can be tricky to get right. The interest is only taxable at the end of the term. However, tax statements are usually provided annually.

If it's so hard for me to keep track, then how does HMRC manage to do it? If HMRC already know how much savings interest I have received then it seems crazy that I am expected to tell them. If I get it wrong then I can end up being fined. Why can't tax payers view the interest amounts that the savings organisations have provided to HMRC?

GeoffTF

There are problems with identifying tax payers. The deposit takers do not necessarily have the information to make it easy for HMRC to identify you uniquely. With fixed term bonds, you are usually allowed to pay the tax year by year or on maturity. HMRC does not know which option you will choose.

wmb194

dosh37 said:

Interest from fixed term accounts can be tricky to get right. The interest is only taxable at the end of the term. However, tax statements are usually provided annually.

It's only in certain circumstances that the interest is wholly taxable at the end of the term i.e. those where the interest hasn't been 'accessible,' meaning that you weren't given the option to have it paid away. In my experience these have been quite rare but they'll be more common now that Nationwide recently decided it's a good idea to begin offering bonds like this. However, Nationwide has been telling people who have asked that it still plans to report the interest annually to HMRC.

Keeping track of the interest isn't hard, you just make a note of it as it's paid. I keep track using MS Money and have it spit out a tax report every year.

Dazed_and_C0nfused

wmb194 said:

dosh37 said:

Interest from fixed term accounts can be tricky to get right. The interest is only taxable at the end of the term. However, tax statements are usually provided annually.

It's only in certain circumstances that the interest is wholly taxable at the end of the term i.e. those where the interest hasn't been 'accessible,' meaning that you weren't given the option to have it paid away. In my experience these have been quite rare but they'll be more common now that Nationwide recently decided it's a good idea to begin offering bonds like this. However, Nationwide has been telling people who have asked that it still plans to report the interest annually to HMRC.

Keeping track of the interest isn't hard, you just make a note of it as it's paid. I keep track using MS Money and have it spit out a tax report every year.

^^^^  This all day long

They're your accounts so it's only a two minute job to keep your own record of the interest paid on each one.

eskbanker

dosh37 said:

I often end up closing an account and opening a new one. Keeping track of the total interest received for tax purposes during the financial year is extremely difficult. I have an Excel spreadsheet that helps but it's easy to make mistakes.

Recording interest received prior to closure and then updating it once the additional proceeds are paid into another account is 'extremely difficult', really?

dosh37 said:

Why can't tax payers view the interest amounts that the savings organisations have provided to HMRC?

This facility was enabled for some via their online tax accounts but was apparently so unreliable, even by HMRC standards, that it was removed.  The fact remains though that it's the taxpayer's responsibility to keep records of all income and to declare it accurately, so even though it would be handy if HMRC provided a safety net against which to reconcile, they're not obliged to....

talexuser

I'm surprised to say it is so difficult if you have a spreadsheet, open, close or get an interest just put it on the spreadsheet, if you can't see a closed account you should know what was in it  and see the interest from wherever it was transferred to.
I'm about to fill in my SA, my spreadsheet has 11 closed savings accounts, 4 running monthly and have been successful to keep the interest at total for the year to £451 so avoid the 20/40% and will just pay the dividend rates instead. Next year and the year after will be much worse with the tax increases courtesy of "the party of low tax".

TheBanker

I don't find it difficult. If you have lots of accounts (and I completely understand why people do, to take advantage of the best rates, new regular savers, current account incentives etc) then you have to be prepared to handle a bit more admin. This could be avoided by having fewer accounts, but that would obviously be at the cost of additional interest.

I have a spreadsheet that I update at the start of each month, and on 6th April. It lists all my accounts and I capture any interest paid in the month, and the month end balance. I fill it in at the same time as I am making any transfers between accounts etc. If I close an account, I note the final figures on the spreadsheet, and download any online statements I'm likely to need before I lose access. If they send a final statement through the mail, I scan it. 

When it's SA time, I already have the information I need.

sparkiemalarkie

@dosh37
I find it really difficult too... and I think it's either something  you're good at or your not..... I'm not!

Over the last couple of years I have come up with some strategies that work for me....
- I don't do regular savers any more - these gave me the biggest headache
- I keep to a limited number of institutions (all of which send tax statements to their online document folder) and work with their best interest rates....
- If I have to chase rate rises - for instance Tesco Bank has no automatic rate rise- I open a new account but keep £1 in the old one so I can look back at it later, then close it in the new tax year
- I've stopped chasing small rate rises for taxable accounts
- I put as much as I can into tax free savings
- I use Hargreaves Lansdown Active Savings for some of my non ISA fixed rate savings - they give a "statement of interest credited", over the tax year, as a total of all savings accounts held with them.

Good luck

sx