tax on savings after house sale

V2001

Hi, so i sold my house, and the cash has gone into a savings account where i can get around 4%

i have to wait a few months before i can get my new place, so will be getting monthly interest on the savings around £2,000 per month.

do i need to declare tax on the interest i be receiving with HMRC?  if they find out can they not adjust my tax code or something.  as i really am clueless about filling in tax forms.  but i dont want to dodge tax, so whats the best approach here?

Dazed_and_C0nfused

V2001 said:

Hi, so i sold my house, and the cash has gone into a savings account where i can get around 4%

i have to wait a few months before i can get my new place, so will be getting monthly interest on the savings around £2,000 per month.

do i need to declare tax on the interest i be receiving with HMRC?  if they find out can they not adjust my tax code or something.  as i really am clueless about filling in tax forms.  but i dont want to dodge tax, so whats the best approach here?

If you get £10k or more in interest in a tax year you should be completing a Self Assessment return.

Less than that (and no other reason to complete a return exists) then HMRC will assess the tax due from the info banks send them.

They aim to collect the tax via a reduction to your tax code if possible but where that isn't possible you will have until 31 January after the end of the tax year before it needs to be paid (at the earliest).

El_Torro

For this amount of money it looks like it'll be difficult (impossible?) for you to stay below the threshold to not pay tax. You can put £50k (or £100k if you're married) in Premium Bonds, and £20k each in a Cash ISA, but this won't be enough for you not to pay tax. Especially if you currently have income from employment or pensions. 

I believe that ringing HMRC and telling them what interest you have earned is enough, you don't need to fill in a self assessment. Assuming you don't have other reasons for filling in a self assessment. I could be wrong on this though.

FrankRizzo

What bank gives you that interest for that big of a balance?

Also how much balance gives you £2k a month?

thanks

la531983

FrankRizzo said:

What bank gives you that interest for that big of a balance?

Also how much balance gives you £2k a month?

thanks

Half a million quid at just under 5%, or 600k at 4%, would yield around two grand a month in interest. 

V2001

well the house sale is 600k so thats what im getting.  my bank in savings acc gives around 4%  so 2k a month interest.

i dont need or have ever filled in a self assesment. i work PAYE so my tax is calculated by the firm i work for and paid.

so i will get over 10k in interest which is what will happen, as i dont see myself getting the house till after 6 months.  so if i can just ring HRMC and tell them that be great to avoid doing a SA.  if i have to do a self assesment i will have to get a accountant to do that as i wont have a clue how to do it.

Dazed_and_C0nfused

V2001 said:

well the house sale is 600k so thats what im getting.  my bank in savings acc gives around 4%  so 2k a month interest.

i dont need or have ever filled in a self assesment. i work PAYE so my tax is calculated by the firm i work for and paid.

so i will get over 10k in interest which is what will happen, as i dont see myself getting the house till after 6 months.  so if i can just ring HRMC and tell them that be great to avoid doing a SA.  if i have to do a self assesment i will have to get a accountant to do that as i wont have a clue how to do it.

Self Assessment is a few minutes work, you copy the information from your P60 and enter a single figure relating to the total taxable interest received during the tax year.

From what you've posted you don't need an accountant but you are perfectly entitled to use one if you so wish.

You can phone HMRC and tell them the interest but tha won't stop the need for a tax return (if the interest reaches £10k).

Flugelhorn

V2001 said:

well the house sale is 600k so thats what im getting.  my bank in savings acc gives around 4%  so 2k a month interest.

i dont need or have ever filled in a self assesment. i work PAYE so my tax is calculated by the firm i work for and paid.

so i will get over 10k in interest which is what will happen, as i dont see myself getting the house till after 6 months.  so if i can just ring HRMC and tell them that be great to avoid doing a SA.  if i have to do a self assesment i will have to get a accountant to do that as i wont have a clue how to do it.

SA is no big deal, I have been doing it for several years - partly because of interest payments, partly professional expenses but mainly because i had too many jobs.
If you have everything to hand it really doesn't take long as you only have to complete sections that are relevant and it guides you through - the calculations are done immediately and you can see how much you need to pay. If it is over  a certain amount it can't be done via the tax code - not sure what the current threshold is though 

Dazed_and_C0nfused

Flugelhorn said:

V2001 said:

well the house sale is 600k so thats what im getting.  my bank in savings acc gives around 4%  so 2k a month interest.

i dont need or have ever filled in a self assesment. i work PAYE so my tax is calculated by the firm i work for and paid.

so i will get over 10k in interest which is what will happen, as i dont see myself getting the house till after 6 months.  so if i can just ring HRMC and tell them that be great to avoid doing a SA.  if i have to do a self assesment i will have to get a accountant to do that as i wont have a clue how to do it.

SA is no big deal, I have been doing it for several years - partly because of interest payments, partly professional expenses but mainly because i had too many jobs.
If you have everything to hand it really doesn't take long as you only have to complete sections that are relevant and it guides you through - the calculations are done immediately and you can see how much you need to pay. If it is over  a certain amount it can't be done via the tax code - not sure what the current threshold is though 

£2999.99 is the limit.

Providing you file the return by 30 December and you earn enough for you to meet HMRC rules on collection via the tax code.

For example if you wouldn't otherwise be due to pay tax via PAYE they won't include the tax owed in your tax code, you'd have to pay it direct.

SiliconChip

FrankRizzo said:

What bank gives you that interest for that big of a balance?

Also how much balance gives you £2k a month?

thanks

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

Easy Access - Kent Reliance 5.01% on up to £1 million

Many notice or fixed term accounts offer even higher rates for amounts up to £1 million.

Simple arithmetic should tell you that £2000 per month is £24,000 per annum which would require a principal of £600,000 at 4%, which the OP has confirmed is the case.

To the OP, whether you need to pay tax depends on a variety of factors, some of which have already been raised, but others include how long the money will be saved for until you need to use it and what other income you have.

One other thing to be aware of is that if all the money is in one account then it will only have FSCS protection on the full amount for 6 months, so if it's going to be longer than that you should consider splitting it across multiple banks to keep the amounts in each below £85,000.

https://www.fscs.org.uk/making-a-claim/claims-process/temporary-high-balances/

Albermarle

V2001 said:

well the house sale is 600k so thats what im getting.  my bank in savings acc gives around 4%  so 2k a month interest.

i dont need or have ever filled in a self assesment. i work PAYE so my tax is calculated by the firm i work for and paid.

so i will get over 10k in interest which is what will happen, as i dont see myself getting the house till after 6 months.  so if i can just ring HRMC and tell them that be great to avoid doing a SA.  if i have to do a self assesment i will have to get a accountant to do that as i wont have a clue how to do it.

You don't need an accountant. What you do need is to be registered on the Government Gateway, so you can fill in the SA online ( easier to correct mistakes) and see your personal tax account online.
Personal tax account: sign in or set up - GOV.UK (www.gov.uk)