Tax on interest

Me72

Hello all. 

Retired last year, have work pension & savings. Interest on savings this year, will exceed £1000 tax free limit. Query is, do I have to inform tax office of extra interest or will they automatically tax me, by changing my tax code ? 

PeskyBlunder

It will be done automatically.

eskbanker

Me72 said:

Interest on savings this year, will exceed £1000 tax free limit.

Are you making any use of ISAs to shelter savings from tax?

Me72

Yes, 20k saved this year in Isa. Interest talking about are in normal saving accounts. 

Doctor_Who

Me72 said:

Hello all. 

Retired last year, have work pension & savings. Interest on savings this year, will exceed £1000 tax free limit. Query is, do I have to inform tax office of extra interest or will they automatically tax me, by changing my tax code ? 

Depending on your pension income you may also have some of the starter rate for savings available (upto £5000 of interest taxed @ 0%). See here for more details:

https://www.moneysavingexpert.com/savings/tax-free-savings/

Dazed_and_C0nfused

Me72 said:

Hello all. 

Retired last year, have work pension & savings. Interest on savings this year, will exceed £1000 tax free limit. Query is, do I have to inform tax office of extra interest or will they automatically tax me, by changing my tax code ? 

Is your non savings non dividend income low enough that you will be able to use the savings starter band?

If you pay tax on less than £5,000 of your pension income then that is likely to be relevant to you.

Bigwheels1111

Do you get £12,570 or more income from pension.
If you get less than £17.570 any interest between income and £18,570 should be tax free.
So 15k pension would leave £3,570 of interest tax free.

safe_hands2

PeskyBlunder said:

It will be done automatically.

I'm still trying to figure out what to do re savings. Is it better to avoid going over the £1000 threshold if possible rather than have to make sure HMRC change tax code correctly? And that it doesn't stay changed when it should go back to normal. I have little faith and don't really want the hassle of having to check. Maybe I've answered my own question!

eskbanker

safe_hands2 said:

PeskyBlunder said:

It will be done automatically.

I'm still trying to figure out what to do re savings. Is it better to avoid going over the £1000 threshold if possible rather than have to make sure HMRC change tax code correctly? And that it doesn't stay changed when it should go back to normal. I have little faith and don't really want the hassle of having to check. Maybe I've answered my own question!

Most who are savvy with their money would advise maximising net return and accept the potential overhead of validating their taxation (which should be the case anyway), but up to you if you want to forego some income for the sake of peace of mind....

safe_hands2

If the interest was coming from just one account it would be easy, but nature of saving now is that I've pots in many places. That's the toss up - forgo some return for less hassle 😀

Bigwheels1111

safe_hands2 said:

If the interest was coming from just one account it would be easy, but nature of saving now is that I've pots in many places. That's the toss up - forgo some return for less hassle 😀

Why ?.

I track the interest on over 20 accounts every month.

I have a word document for each and just update it.

When my fixed rates pay I add them to the list, takes about 20 minutes a month and most of that is logging in.