Self employed and Tax Credits Renewal - Savings Interest?

alewin

I'm self employed and do a self assessment every year. For the Tax Credits renewal I normally just subtract my gross pension contributions from the profits. However I now have some savings interest for the tax year just finished and it's confusing me.

For the Tax Credits renewal the first £300 of savings interest is ignored, although the interest (only just over £60) will have to be included on the self assessment return. So will the income for Tax Credits be the profits + interest then minus pension contributions.

So in effect when self employed the first £300 is effectively not ignored. Only those employed as PAYE.

Have I got this right, anyone have similar? Is the interest on the self assessment return actually counted as income?

Dazed_and_C0nfused

Self Assessment returns include all taxable income so unless it is interest from an ISA it's going to be included and taxed.  Although probably at a 0% rate.

AIUI if you declare £60 in the miscellaneous (?) income section then it will be ignored for tax credit purposes.

Why do you think the first £300 of employment income would be ignored for tax credit purposes 🤔

Spoonie_Turtle

Dazed_and_C0nfused said:

Why do you think the first £300 of employment income would be ignored for tax credit purposes 🤔

I think they meant the savings interest, as employed people wouldn't have a self-assessment and Tax Credits would take their income information from PAYE (unless earning over £50,000, of course, but I'd imagine people claiming Tax Credits would less likely be earning that much).

sheramber

Do you not show  savings interest separately on the tax credit form?

Since it is under £300 it will be disregarded.

alewin

Dazed_and_C0nfused said:

AIUI if you declare £60 in the miscellaneous (?) income section then it will be ignored for tax credit purposes.

Why do you think the first £300 of employment income would be ignored for tax credit purposes 🤔

Thanks for the replies, yes I did mean that the first £300 of interest from savings is ignored when renewing Tax Credits.

Just wanted to know if the the interest is counted as income for self assessment purposes, i.e added to the profits to get a combined income for the year. Which I can then use when renewing Tax Credits online. I'm confused by this.

I'm not trying to maximise the Tax Credits payments, just want to fill out the form correctly and input the correct figures. So they tally.

Only asking because I normally do my self assessment at the end of the year, in December and the Tax Credits renewal is due soon. Am I making things too hard for myself?

sheramber

No, it is not added to your self employed profit.

It comes under other income and, as you deduct £300 from the total before entering it,  your entry is zero

Dazed_and_C0nfused

alewin said:

Dazed_and_C0nfused said:

AIUI if you declare £60 in the miscellaneous (?) income section then it will be ignored for tax credit purposes.

Why do you think the first £300 of employment income would be ignored for tax credit purposes 🤔

Thanks for the replies, yes I did mean that the first £300 of interest from savings is ignored when renewing Tax Credits.

Just wanted to know if the the interest is counted as income for self assessment purposes, i.e added to the profits to get a combined income for the year. Which I can then use when renewing Tax Credits online. I'm confused by this.

I'm not trying to maximise the Tax Credits payments, just want to fill out the form correctly and input the correct figures. So they tally.

Only asking because I normally do my self assessment at the end of the year, in December and the Tax Credits renewal is due soon. Am I making things too hard for myself?

You are overcomplicating things a bit yes!

If it is a personal savings account then it has no connection with your (business) profits.

But it does need to be declared in the interest section of a Self Assessment return.  And assuming your profits use all of your Personal Allowance it will likely then get taxed at 0%.  

calcotti

Dazed_and_C0nfused said:.

But it does need to be declared in the interest section of a Self Assessment return.  And assuming your profits use all of your Personal Allowance it will likely then get taxed at 0%.  

Isn’t the interest coming to come under the nil rate savings allowance.

Dazed_and_C0nfused

calcotti said:

Dazed_and_C0nfused said:.

But it does need to be declared in the interest section of a Self Assessment return.  And assuming your profits use all of your Personal Allowance it will likely then get taxed at 0%.  

Isn’t the interest coming to come under the nil rate savings allowance.

The only time it wouldn't get taxed is if there was spare Personal Allowances available.

In the absence of those it will fall to be taxed at one of the five tax rates applicable to savings interest.

Savings starter rate (0%)
Savings nil rate (0%)
Savings basic rate (20%)
Savings higher rate (40%)
Savings additional rate (45%)

Chances are it will be the second one (aka Personal Savings Allowance). So it gets taxed but no tax is actually payable 🙄

calcotti

Dazed_and_C0nfused said:

Chances are it will be the second one (aka Personal Savings Allowance). So it gets taxed but no tax is actually payable 🙄

I see the distinction! (I also overlooked your reference to the 0% band in your previous reply.j