Self Assessment for over £10,000 interest. Before or after tax?

subjecttocontract

Why the surprise that some people have a different take on the HMRC notes.......don't we all know that Government(s) couldn't organise a party in a brewery. 

Olinda99

@eskbanker

unfortunately I have to disagree the site could not be any clearer in that all savings interest has to be taken into consideration

https://www.gov.uk/check-if-you-need-tax-return/y/no/no/no/between-0-and-50-000/no

Dazed_and_C0nfused

Olinda99 said:

@eskbanker

unfortunately I have to disagree the site could not be any clearer in that all savings interest has to be taken into consideration

https://www.gov.uk/check-if-you-need-tax-return/y/no/no/no/between-0-and-50-000/no

If that was true you could end up in bizarre Kafkaesque situation where HMRC removed you from Self Assessment after you filed each return and then you need to immediately register again.

https://www.gov.uk/hmrc-internal-manuals/self-assessment-manual/sam101042

Olinda99

it is not true - never said it was !

clearly the website is sloppily written is all I was saying.

eskbanker

Olinda99 said:

@eskbanker

unfortunately I have to disagree the site could not be any clearer in that all savings interest has to be taken into consideration

https://www.gov.uk/check-if-you-need-tax-return/y/no/no/no/between-0-and-50-000/no

We were looking at different pages, so yes, the simplified wizard loses a lot of the context (and content) of the explanatory page.

contrarywise

This goes around and around -
(1) does interest from an ISA count towards your PSA - NO because its tax free so does not count to your PSA and hence no tax  liablity;
(2) does your interest from an ISA cound towards your need to register for SA  Accordoing to HMRC "You need to register for Self Assessment if your income from savings and investments is over £10,000." - no qualification for interest exempt from tax so the answer would be YES and thats what the HMRC website responds - so again down to the distinction between disclosure and liability. Maybe HMRC could clarify what they mean.

contrarywise

The HMRC wesite is clear that registration for Self Assessment if if yourincome from savings and investments is over £10,000pa  i.e. based on disclosure not liability - the PSA  allowance is based on liability. So tax free interest from an ISA or other tax free interestor investment woule be included in the amount for registration for SA but would not c0unt towards your PSA. But it would be helpful given the confusion if the HMRC could include a simple clarification of this.

kippo1

So hypothetically if the only interest i made was £20,000 from an isa and nothing else i would have
to register for self assessment and then fill in the interest box with £0.

spider42

It is worth pointing out that ALL of the Self Assessment "criteria" on the HMRC website (including the £10,000 of interest one) are plucked from HMRC's imagination. None of them have any legal basis whatsoever - they only are HMRC's wishes, not the law. There is no legal requirement for ANYBODY to "register for Self Assessment". You will not see a single one of HMRC's registration criteria set out anywhere in tax legislation, because there is nothing in legislation which compels anybody to "register for Self Assessment".

The way the legislation works is as follows:

Section 7 TMA1970 requires a taxpayer to notify HMRC if they have a liability to Income Tax or CGT, unless that liability has been or will be collected at source (e.g. via PAYE), or has been assessed via a simple assessment.

You are required by Section 8 TMA1970 to complete a Self Assessment return only if HMRC have given you a notice asking you to complete a Self Assessment return.

HMRC's response to receiving a notification under Section 7 may well be to put you in Self Assessment and issue you a notice to complete a return under Section 8, but there is no obligation on a taxpayer to register themselves. There are no penalties for not registering for Self Assessment, even if the HMRC website tells you that you need to, as there is no legal obligation. There can be penalties for failure to notify liability under Section 7.

If you receive £20,000 on ISA interest, you have no obligation to do anything, as you have no tax liability. If you had £15,000 of interest outside an ISA and no other income, you also have no requirement to do anything, as you have no liability (due to the savings allowance). You would only be required to complete a tax return if HMRC give you a notice demanding you complete a tax return. If they do that, you are compelled to complete it, whether you owe any tax or not.

EthicsGradient

contrarywise said:

This goes around and around -
(1) does interest from an ISA count towards your PSA - NO because its tax free so does not count to your PSA and hence no tax  liablity;
(2) does your interest from an ISA cound towards your need to register for SA  Accordoing to HMRC "You need to register for Self Assessment if your income from savings and investments is over £10,000." - no qualification for interest exempt from tax so the answer would be YES and thats what the HMRC website responds - so again down to the distinction between disclosure and liability. Maybe HMRC could clarify what they mean.

Hang on a moment - where did "and thats what the HMRC website responds" come from? HMRC has never said that.

Some people are assuming that ISA interest is counted, but there is nothing to say it is, and it would be illogical if it were - you don't report ISA interest.