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

jak22

ISA interest is not taxable.
If you receive over 10k taxable interest then register for SA as it's not that hard to do.
If your total taxable and ISA interest takes you over 10k and you're more comfortable registering for SA then do that but no need to suggest it's necessary for others.

boingy

Does anyone know whether banks report ISA interest to HMRC? It's not something I've ever thought about before.

eskbanker

EthicsGradient said:

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.

It comes from the wizard on the HMRC site, that leads you through a series of questions to ascertain if SA is needed:

https://www.gov.uk/check-if-you-need-tax-return

As pointed out by @Olinda99, question 6 is phrased as a simplistic "Did you get more than £10,000 from dividends or savings and investments?", and if you answer 'yes' then it responds by saying "You need to send a Self Assessment tax return".

If the word 'taxable' was inserted, or 'excluding income from ISAs', then that would be clearer, but the absence of such qualification means that if taking those words literally at face value (and ignoring guidance elsewhere on the site) that would suggest that ISA income is within scope.

Beddie

necronom said:

Thanks.
It looks like I'm going to have to fill in stuff for my job as well, even though I've never needed to do this before, and they already know all this.

I do self assessment - if I have any employed income it's usually filled in automatically on the online form. So you could check the figures against your P60, but they should be correct. 

EthicsGradient

eskbanker said:

EthicsGradient said:

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.

It comes from the wizard on the HMRC site, that leads you through a series of questions to ascertain if SA is needed:

https://www.gov.uk/check-if-you-need-tax-return

As pointed out by @Olinda99, question 6 is phrased as a simplistic "Did you get more than £10,000 from dividends or savings and investments?", and if you answer 'yes' then it responds by saying "You need to send a Self Assessment tax return".

If the word 'taxable' was inserted, or 'excluding income from ISAs', then that would be clearer, but the absence of such qualification means that if taking those words literally at face value (and ignoring guidance elsewhere on the site) that would suggest that ISA income is within scope.

Yes, but, again, it does not say "including ISA interest" (or, for that matter, ISA dividends, which, by this "if they don't specify, then it must include ISAs" reading, would need to be counted too). To write "so the answer would be YES and thats what the HMRC website responds " is incorrect. "Ignoring guidance elsewhere" is not a good way to do things.

contrarywise

The response is from the www.gov.uk/check-if-you-need-tax-return/ - Title - Check if you need to send a self assessment tax return.

Keeping my answers answers to the other questions the same I just changed my answer to the question - do you get more than £10,000 from dividends or savings and investments from No to Yes - the answer to the question do you need to send a self-assessment tax return changes from No to Yes you need to send a self-assesment tax return.
The is no distinction made between ISA and non-ISA interest on that system. Nor any mention of the legal position concerning the requirement to complete a Self Assessment. But the ISA interest would have no tax liability anyway. 

contrarywise

Nor would the personal allowance.

EthicsGradient

contrarywise said:

The response is from the www.gov.uk/check-if-you-need-tax-return/ - Title - Check if you need to send a self assessment tax return.

Keeping my answers answers to the other questions the same I just changed my answer to the question - do you get more than £10,000 from dividends or savings and investments from No to Yes - the answer to the question do you need to send a self-assessment tax return changes from No to Yes you need to send a self-assesment tax return.
The is no distinction made between ISA and non-ISA interest on that system. Nor any mention of the legal position concerning the requirement to complete a Self Assessment. But the ISA interest would have no tax liability anyway. 

Income Tax - GOV.UK (www.gov.uk) leads, first, to Tax on dividends: How dividends are taxed - GOV.UK (www.gov.uk), which says "You do not pay tax on dividends from shares in an ISA.", and then

Pay tax on over £10,000 in dividends

You’ll need to fill in a Self Assessment tax return.

But, since you don't pay tax on dividends from shares in an ISA, you don't count them. Then we move to Tax on savings interest: How much tax you pay - GOV.UK (www.gov.uk), which again says "You need to register for Self Assessment if your income from savings and investments is over £10,000". Again, you don't count the stuff that no-one ever pays income tax on.

Self-assessment has no way of reporting either dividend income in an ISA, or interest income in an ISA.

HMRC at no point has said that ISA income should be counted. Not in any link anyone has found.

You can try and waste HMRC's time if you want, but it should be clear that no one else needs to.

dales1

boingy said:

Does anyone know whether banks report ISA interest to HMRC? It's not something I've ever thought about before.

Well they certainly report ISA balances to HMRC.

Because HMRC can tell if you've opened up too many ISAs or oversubscribed.

And HMRC know how many ISA millionaires there are, because they give out the numbers.

contrarywise

The Banks and Buildings Society Interest (BBSI) reports ISA balances - advice from the Government website on the need for self assessment Q7 Did you get more than £10,000 from dividends or savings and investments? Which  triggers the response - You need to send a Self Assessment tax return - is not helpful unless it it is clear that it excludes ISA interest in the total - in this case where non-ISA interst was below £10,000 pa but total interest including ISA interest was above £10,000 this where is should be most clear on the need for Self-Assessment.