Going over my personal savings allowance

Dempseyh

Hi, with all the increases in interest I'm going to be going over my personal savings allowance and need to pay tax. I don't have a clue about any of this, would I be best taking 20k out of my savings and putting it into an ISA to avoid the tax, if I just leave it will HMRC spot iv gone over my allowance if I don't declare it?

Thanks

xylophone

https://community.hmrc.gov.uk/customerforums/pt/f58be9bc-b471-ed11-97b0-00155d9c7b3d

HMRC will be notified by the financial institution after the tax year has ended and we would update your records accordingly.

You can contact us by telephone or in writing before this is done.

However, you would need to provide the name of the financial institution, account numbers, share of interest and the interest amount.

Albermarle

Best cash ISAs: up to 4.43% easy access, up to 5.77% fixed - MSE (moneysavingexpert.com)

eskbanker

Dempseyh said:

I don't have a clue about any of this, would I be best taking 20k out of my savings and putting it into an ISA to avoid the tax

Nothing stopping you from using an ISA, but in general the best approach is to compare your net return, i.e. paying some tax may not necessarily give you a worse return than a tax-free ISA, depending on the rates and balances involved.

Dempseyh said:

if I just leave it will HMRC spot iv gone over my allowance if I don't declare it?

Yes, you don't need to do anything (unless you already self-assess):

https://www.moneysavingexpert.com/savings/personal-savings-allowance/#tax

Dempseyh

Great thanks guys 

newatc

I'm not sure you shouldn't do anything. Before rates fell I was paying tax (and I will again if not this tax yesar, the next) and HMRC invariably got it wrong so you need to keep your own records and check HMRC claims for tax (usually by tax code changes).
It was like pulling teeth getting them to correct it previously so I'm dreading going through that again when their service has apparently , by media reports, worsened.

eskbanker

eskbanker said:

Dempseyh said:

if I just leave it will HMRC spot iv gone over my allowance if I don't declare it?

Yes, you don't need to do anything (unless you already self-assess):

https://www.moneysavingexpert.com/savings/personal-savings-allowance/#tax

newatc said:

I'm not sure you shouldn't do anything. Before rates fell I was paying tax (and I will again if not this tax yesar, the next) and HMRC invariably got it wrong so you need to keep your own records and check HMRC claims for tax (usually by tax code changes).

Yes, to be more specific, there's no need to declare anything or proactively inform HMRC, but that doesn't mean that they'll get everything right, and so later on it may indeed be necessary to validate their calculation (when you eventually see it) and correct if required....

Aminatidi

Does anyone know the extent to which providers notify HMRC?

For example I believe the coupon on gilts is classed as interest rather than dividend.

If I buy individual gilts via HL will they notify HMRC?

booneruk

Have people actually experienced HMRC attributing too much interest and over taxing?

I'm wondering how this would happen if they use submissions from banks, unless the banks report over inflated numbers. Does this happen? I've never been able to see my interest breakdown by institution in my tax account, but I hear others have. All I have witnessed is quite an under reporting of total interest received last year.

(I'm aware HMRC will use interest received in the current year as an estimate for next year's - but I assume tax bands would eventually be adjusted to put any differences right after the banks report in)

I've attempted to come in a pound or two under my £500 allowance this year, never came close to exceeding it in previous years and so assumed I'd not need to do anything whatsoever now!

newatc

booneruk said:

Have people actually experienced HMRC attributing too much interest and over taxing?

I'm wondering how this would happen if they use submissions from banks, unless the banks report over inflated numbers. Does this happen? I've never been able to see my interest breakdown by institution in my tax account, but I hear others have. All I have witnessed is quite an under reporting of total interest received last year.

(I'm aware HMRC will use interest received in the current year as an estimate for next year's - but I assume tax bands would eventually be adjusted to put any differences right after the banks report in)

I've attempted to come in a pound or two under my £500 allowance this year, never came close to exceeding it in previous years and so assumed I'd not need to do anything whatsoever now!

In my experience they are quite capable of duplicating entries plus if they get no entry for an account which is now closed and has no interest in the tax year in question, they can assume the interest of the prior year.
I'm sure there are many other ways they can mess it up (to your disadvantage) that I haven't come across yet.