HMRC & savings interest for HRT query

fizio

I have read a few threads and am not entirely clear so would appreciate any input.
Basic rate tax payer and have 6 figure cash savings incl a multi-year fixed savings account with hight st bank and will definitely fall into 40% tax band when all the interest is added to other income. Am trying to find out my tax position for next year so have 2 questions

1. I am aware that for basic tax payers HMRC will calc the interest based on bank input and change the tax code accordingly. My questions is that is there any way to get hmrc to tell a HRT payer the same info as it will save me trying to search through 20 odd current & savings account to manually do it myself

2. My 2 year fixed account has sent me a statement for year 1 interest and added it to the balance. Does this mean that this will/should be included in the tax return even though other feedback is that interest should be added at maturity when it can be accessed. I am fine with it on an annual basis as it uses some my 1000 allowance and may keep me below 40% rate.

I will also try and call up hmrc but not sure how easy it is to get through these days 

Dazed_and_C0nfused

1.  There should be no difference due to your tax rate.  If you don't need to complete a tax return then HMRC will calculate any tax due after the end of the tax year.  It typically works on a 3 year cycle,
Year 1 - earn the interest
Year 2 - banks/building societies report the interest for year 1 and HMRC calculate any additional tax due for year 1 (tax owed for any reason, not just the interest)
Year 3 - the tax due for year 1 is included in the tax code for year 3

HMRC also usually amend your tax code on the basis that you will receive the same interest in year 2 as you did in year 1.  And that is then reviewed again once HMRC receive the actual interest details for year 2.

2.  If the bank has credited it to your account then I would assume it has been reported to HMRC for that tax year.  But you can always ask HMRC for details they have received.

If your interest reaches £10k in a tax year then HMRC will want you to register for Self Assessment.

Also, there is no extra allowance for interest.  If you have used all your Personal Allowance on non savings non dividend income (often earnings or pension) then all the interest will be taxed.  But the first £500 (or £1,000) will be taxed at 0%.  This £500/£1,000 taxed at 0% counts towards adjusted net income (used for HICBC and tapered Personal Allowance).

masonic

Glad to see this in fact has nothing to do with the menopause.

born_again

Do you not have a ISA?

Hoenir

fizio said:

I will also try and call up hmrc but not sure how easy it is to get through these days 

Probably easiest to source the information yourself directly from the institutions you hold accounts with. All will send a secure message to your online account with a certificate attached for each savings account held with them. . 

fizio

born_again said:

Do you not have a ISA?

Yes - already maxed

fizio

Not that easy with 20+ accounts. Normally I just spend a couple of hours going through all the accounts online and adding up the interest. Seem unnecessary if hmrc already has the info.

Hoenir

fizio said:

Not that easy with 20+ accounts. Normally I just spend a couple of hours going through all the accounts online and adding up the interest. Seem unnecessary if hmrc already has the info.

If an institution does not supply the information directly. Then the responsibility remains yours to report.  

fizio

Dazed_and_C0nfused said:

1.  There should be no difference due to your tax rate.  If you don't need to complete a tax return then HMRC will calculate any tax due after the end of the tax year.  It typically works on a 3 year cycle,
Year 1 - earn the interest
Year 2 - banks/building societies report the interest for year 1 and HMRC calculate any additional tax due for year 1 (tax owed for any reason, not just the interest)
Year 3 - the tax due for year 1 is included in the tax code for year 3

HMRC also usually amend your tax code on the basis that you will receive the same interest in year 2 as you did in year 1.  And that is then reviewed again once HMRC receive the actual interest details for year 2.

2.  If the bank has credited it to your account then I would assume it has been reported to HMRC for that tax year.  But you can always ask HMRC for details they have received.

If your interest reaches £10k in a tax year then HMRC will want you to register for Self Assessment.

Also, there is no extra allowance for interest.  If you have used all your Personal Allowance on non savings non dividend income (often earnings or pension) then all the interest will be taxed.  But the first £500 (or £1,000) will be taxed at 0%.  This £500/£1,000 taxed at 0% counts towards adjusted net income (used for HICBC and tapered Personal Allowance).

Thanks for the comments
1. I have to do a self assessment every year due to being a Director but income is below 50k so I can stay basic rate tax payer - at least until now.
2. Would be great if hmrc could profile the interest given they have the number but will call and ask anyway
3. Not sure I get this point around what else this allowance can be used for - I use the £2k for dividend but thats separate to savings allowance

Dazed_and_C0nfused

fizio said:

Dazed_and_C0nfused said:

1.  There should be no difference due to your tax rate.  If you don't need to complete a tax return then HMRC will calculate any tax due after the end of the tax year.  It typically works on a 3 year cycle,
Year 1 - earn the interest
Year 2 - banks/building societies report the interest for year 1 and HMRC calculate any additional tax due for year 1 (tax owed for any reason, not just the interest)
Year 3 - the tax due for year 1 is included in the tax code for year 3

HMRC also usually amend your tax code on the basis that you will receive the same interest in year 2 as you did in year 1.  And that is then reviewed again once HMRC receive the actual interest details for year 2.

2.  If the bank has credited it to your account then I would assume it has been reported to HMRC for that tax year.  But you can always ask HMRC for details they have received.

If your interest reaches £10k in a tax year then HMRC will want you to register for Self Assessment.

Also, there is no extra allowance for interest.  If you have used all your Personal Allowance on non savings non dividend income (often earnings or pension) then all the interest will be taxed.  But the first £500 (or £1,000) will be taxed at 0%.  This £500/£1,000 taxed at 0% counts towards adjusted net income (used for HICBC and tapered Personal Allowance).

Thanks for the comments
1. I have to do a self assessment every year due to being a Director but income is below 50k so I can stay basic rate tax payer - at least until now.
2. Would be great if hmrc could profile the interest given they have the number but will call and ask anyway
3. Not sure I get this point around what else this allowance can be used for - I use the £2k for dividend but thats separate to savings allowance

1.  In that case ignore a lot of what I said as you self assess the interest.  HMRC will open an investigation if they don't agree with what you have declared.

2.  They should be able to tell you what was reported for 2022-23 (banks are meant to report it by 30 June after the end of the tax year).

3.  There is no separate allowance for dividends.  If you have no spare Personal Allowance and check your Self Assessment calculation you will see that all dividends have been taxed, albeit the first slice at 0%.

EthicsGradient

fizio said:

Dazed_and_C0nfused said:

1.  There should be no difference due to your tax rate.  If you don't need to complete a tax return then HMRC will calculate any tax due after the end of the tax year.  It typically works on a 3 year cycle,
Year 1 - earn the interest
Year 2 - banks/building societies report the interest for year 1 and HMRC calculate any additional tax due for year 1 (tax owed for any reason, not just the interest)
Year 3 - the tax due for year 1 is included in the tax code for year 3

HMRC also usually amend your tax code on the basis that you will receive the same interest in year 2 as you did in year 1.  And that is then reviewed again once HMRC receive the actual interest details for year 2.

2.  If the bank has credited it to your account then I would assume it has been reported to HMRC for that tax year.  But you can always ask HMRC for details they have received.

If your interest reaches £10k in a tax year then HMRC will want you to register for Self Assessment.

Also, there is no extra allowance for interest.  If you have used all your Personal Allowance on non savings non dividend income (often earnings or pension) then all the interest will be taxed.  But the first £500 (or £1,000) will be taxed at 0%.  This £500/£1,000 taxed at 0% counts towards adjusted net income (used for HICBC and tapered Personal Allowance).

Thanks for the comments
1. I have to do a self assessment every year due to being a Director but income is below 50k so I can stay basic rate tax payer - at least until now.
2. Would be great if hmrc could profile the interest given they have the number but will call and ask anyway
3. Not sure I get this point around what else this allowance can be used for - I use the £2k for dividend but thats separate to savings allowance

Note that the dividend allowance is down to £1,000 this tax year, and £500 next.