Taxation of interest

CaptainWales

if I go over my annual allowance how can I pay any tax due? Do I have to register for self-assessment? 

masonic

For deposit account interest, you would only need to register for self-assessment if you earn interest in excess of £10k. Otherwise it is collected via your tax code (assuming you have sufficient earnings) once HMRC receives information from the providers.

molerat

When HMRC reconcile the year they will adjust your code the following year to recoup anything owed.  There is no need to self assess unless your interest is in excess of £10K.

Dazed_and_C0nfused

CaptainWales said:

if I go over my annual allowance how can I pay any tax due? Do I have to register for self-assessment? 

Not unless your interest was £10,000 or more.

HMRC's preferred option is to collect the tax due via a reduction to your tax code.

It usually works on a 3 year cycle.  For example tax due for 2023-24 will be calculated during 2024-25 and collected via your 2025-26 tax code.

If you prefer though you can make a voluntary payment to avoid your tax code being adjusted for the tax owed.

But if including it in your tax code isn't possible, for example the amount owed is £3,000 or more, then you would be sent a Simple Assessment calculation and have to pay the tax direct to HMRC by 31 January* after the end of the tax year in question.
*you will always get a minimum of 3 months to pay so if HMRC are late issuing the Simple Assessment it could be later than 31 January.

CaptainWales

Thanks for the comments. 

Is there any way I can legally get around exceeding my personal savings allowance? I am a basic rate taxpayer. 

Dazed_and_C0nfused

CaptainWales said:

Thanks for the comments. 

Is there any way I can legally get around exceeding my personal savings allowance? I am a basic rate taxpayer. 

Well the first thing would be to consider if you have any available savings starter rate band to use as that must be used before the savings nil rate band (aka Personal Savings Allowance).

If not then all you need to do is move money to non interest paying accounts or a cash ISA.

But 4% that gets taxed at basic rate is better (financially) than 3% that is tax exempt.

CaptainWales

Already maxed out my isa and don't want to leave in non interest paying account for any length of time

Bigwheels1111

Do you earn less than £12,570. Or more.
If more is it less than £17,570.
If you earn say £15,000 that would leave you £3,570 of tax free interest allowance.

MX5huggy

CaptainWales said:

Thanks for the comments. 

Is there any way I can legally get around exceeding my personal savings allowance? I am a basic rate taxpayer. 

Premium Bond prizes are tax free. 

masonic

As well as Premium Bonds, an alternative (but advanced) option would be to hold individual gilts in a general investment account, as an alternative to fixed term savings. Several of these pay very little in interest, but return a guaranteed tax-exempt capital gain if held to maturity.

VNX

CaptainWales said:

Already maxed out my isa and don't want to leave in non interest paying account for any length of time

You could open some fixed rate bonds with differing maturing years. 

This way you’ll get good rates, if you work out the maximum investment in each to earn under 1,000 pounds in each year and then when each matures put that into isas.