PAYE and making savings interest self assessment return

sorethumbs1992

I'm currently on 30k a year employment paid and taxed the usual PAYE way.  Due to a bereavement I may soon have some inheritance that could possibly mean I will get some significant return of interest.

I know over 10k of interest requires a self assessment to be completed.  Is anyone in the same position of holding a normal PAYE job but needing to do the self assessment as well for earning high interest?

I'm wondering if its fairly straight forward completing the self assessment, filling out my job wages from the P60 and then totting up any interest paid from any bank account.
I assume they know tax has been paid on the wages and will then work out how much they want back from the interest on savings.

Then how do they claim it - would I get a bill or would they change my tax code on my job to gradually claw the amount back through my PAYE

Dazed_and_C0nfused

sorethumbs1992 said:

I'm currently on 30k a year employment paid and taxed the usual PAYE way.  Due to a bereavement I may soon have some inheritance that could possibly mean I will get some significant return of interest.

I know over 10k of interest requires a self assessment to be completed.  Is anyone in the same position of holding a normal PAYE job but needing to do the self assessment as well for earning high interest?

I'm wondering if its fairly straight forward completing the self assessment, filling out my job wages from the P60 and then totting up any interest paid from any bank account.
I assume they know tax has been paid on the wages and will then work out how much they want back from the interest on savings.

Then how do they claim it - would I get a bill or would they change my tax code on my job to gradually claw the amount back through my PAYE

You need to provide a single figure for the total interest received in the tax year.

The PAYE income (and tax deducted) will often be pre-populated for you to check that's all present and correct.

Before you submit the return you can view the tax calculation to see the amount due.

As you are on PAYE there are two boxes near the end of their refund you need to pay special attention to.

One asks if you want your current tax code updating using the info from your tax return.  That is to get the current tax year as up to date as possible, it has nothing to do with the tax due for the tax year the tax return is for.

The second is about how you want to pay the tax.  If it's less than £3k you can usually have it included in the following year's tax code.  But you can pay it direct to HMRC if you prefer.  That keeps life simpler but you are paying it earlier than is strictly necessary.  For example the tax due for the current tax year would be payable on 31 January 2025.  

If you want the tax collecting via your tax code you must file the return by 30 December.

It's often a 3 year cycle,

Year 1 (say 2023-24) you earn the interest
Year 2 (2024-25) you file the return for year 1
Year 3 (2025-26) you pay the tax from year 1 by an adjustment to your year 3 tax code.

sorethumbs1992

Very helpful, many thanks. This is probably going to be relevant to year 24/25 now.

So to sum up
24/25 earn interest
25/26 declare the interest from 24/25, my tax code would not be affected in this year (if I decline having my tax code updated)
26/27 I would start paying the 24/25 interest through amended tax code.

Is there any benefit in actually asking them to change my code part way through the year (I'm assuming this would be somewhere around late 2025).  Is that going to mean I've paid more tax for half of a year (25/26) and reduce my tax bill for the next year in the cycle (28/29)

Dazed_and_C0nfused

sorethumbs1992 said:

Very helpful, many thanks. This is probably going to be relevant to year 24/25 now.

So to sum up
24/25 earn interest
25/26 declare the interest from 24/25, my tax code would not be affected in this year (if I decline having my tax code updated)
26/27 I would start paying the 24/25 interest through amended tax code.

Is there any benefit in actually asking them to change my code part way through the year (I'm assuming this would be somewhere around late 2025).  Is that going to mean I've paid more tax for half of a year (25/26) and reduce my tax bill for the next year in the cycle (28/29)

That would be the benefit.  Some people like that as it's a smaller bill later on (to be paid in 27/28, not 28/29).

Others would see paying tax earlier than strictly necessary as a bad move (financially).

Just go with whatever is best for you.

Albermarle

  Due to a bereavement I may soon have some inheritance that could possibly mean I will get some significant return of interest.

Have you considered other ways to sue the inheritance rather than just putting it in savings accounts?

Depending on your personal circumstances it MAY be better to also - 

Pay off part of a mortgage

Invest money that might not be needed for some years.

Add money to your pension 

etc 

xylophone

Have you considered other ways to sue the inheritance rather than just putting it in savings accounts?

Presumably a typo..

In his circumstances, the OP may wish to use his full ISA allowance (if he hasn't already) for this  tax year and then as soon as possible in the next.

He might also wish to repay any debt  on which he will pay  more in interest  than he receives in interest after tax is taken into account.

A maximum pension contribution would also be worth consideration.

He might consider Premium Bonds.

Qyburn

sorethumbs1992 said:

I'm wondering if its fairly straight forward completing the self assessment, filling out my job wages from the P60 and then totting up any interest paid from any bank account.

Self Assessment tax return is dead easy. For one thing you can stop at any time, saving what you've entered so far, if you need to check anything. 

sorethumbs1992

Thanks for the input. Yes I will look at getting ISA for current year topped up as much as I can before probate is all settled and then use up a 24/25 ISA when things are settled. 
Mortgage is good advice I hadn't realised what would be paid over the remaining duration opposed to paying it off sooner. Quite a saving and my account says there are no early repayment charges. Not sure if that means I can just pay the balance without penalty