Reporting savings interest to HMRC

rigby44

Hi all,

I’m sure this has been raised and answered many times, but there is so much conflicting information out there.

Next week i’ll receive my first Chip! interest payout.

Do I need to proactively tell HMRC about this interest earnings, or are Chip obligated to do so? I understand i’ll have to pay 20% tax on this interest, which will likely be deducted monthly via PAYE.

But do I need to proactively inform HMRC?

Thanks in advance.

eskbanker

rigby44 said:

Do I need to proactively tell HMRC about this interest earnings, or are Chip obligated to do so?

The latter - you only need to take action yourself if (a) you earned over £10K in interest and (b) weren't already self-assessing.

rigby44

eskbanker said:

rigby44 said:

Do I need to proactively tell HMRC about this interest earnings, or are Chip obligated to do so?

The latter - you only need to take action yourself if (a) you earned over £10K in interest and (b) weren't already self-assessing.

Thank you Esk!

What if Chip dont tell HMRC until year end? Are they likely to then only begin taxing me monthly via PAYE, or will they ask for the whole tax amount between now and April 2024 in a lump sum?

Bigwheels1111

Do you have online access to your hmrc account.
You can look at it after April an see if it’s been altered, in 2024.

ColdIron

They will probably tell them next year, maybe May. There is no point telling them this year as HMRC won't know how much tax you've paid this financial year until it finishes

rigby44

ColdIron said:

They will probably tell them next year, maybe May. There is no point telling them this year as HMRC won't know how much tax you've paid this financial year until it finishes

And then I’ll pay the tax off monthly thereafter? They wont want it up front in a lump sum?

Excuse my ignorance…

ColdIron

If you owe any tax HMRC will adjust your tax code, they won't want a lump sum payment

However depending upon your other income (earnings, pension etc) you may owe no tax at all

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

Dazed_and_C0nfused

There are situations where you will be asked to pay direct.

But you wouldn't have to pay it before 31 January after the end of the tax year and HMRC's normal preference is to collect it via your tax code.

If it's a large amount (£3k or more) or you wouldn't be due to pay tax normally in the year it would be collected then that's usually when you have to pay direct.

In most cases there is a 3 year cycle to this.

Year 1 - you earn the interest
Year 2 - the bank reports the interest earned for year 1 to HMRC and HMRC calculate any tax owed for year 1
Year 3 - the tax owed for year is included in your tax code for year 3

rigby44

Dazed_and_C0nfused said:

There are situations where you will be asked to pay direct.

But you wouldn't have to pay it before 31 January after the end of the tax year and HMRC's normal preference is to collect it via your tax code.

If it's a large amount (£3k or more) or you wouldn't be due to pay tax normally in the year it would be collected then that's usually when you have to pay direct.

In most cases there is a 3 year cycle to this.

Year 1 - you earn the interest
Year 2 - the bank reports the interest earned for year 1 to HMRC and HMRC calculate any tax owed for year 1
Year 3 - the tax owed for year is included in your tax code for year 3

I think the annual tax (20%) will total approx £760 for year one. I’ll just make sure to keep that amount back, in case I have to pay a lump sum one day.

Thank you @dazed