Declaring Tax on Savings

alongtimetogoyet

Please could someone advise me on the best way to pay my tax due on savings interest.

Due to the combination of higher interest rates and receiving an inheritance last year I am likely to exceed £10k in this financial year. This is also likely to be the case for the next 2-3 years as I gradually move the capital to ISAs/pension etc.

Doing some research on the matter can someone please confirm that I need to complete a self-assessment form once the tax year has finished and HMRC will calculate what I owe which I believe I have to pay by the end of next January. I would rather pay it in one go than have my tax code adjusted. 

Thanks in advance.

Dazed_and_C0nfused

alongtimetogoyet said:

Please could someone advise me on the best way to pay my tax due on savings interest.

Due to the combination of higher interest rates and receiving an inheritance last year I am likely to exceed £10k in this financial year. This is also likely to be the case for the next 2-3 years as I gradually move the capital to ISAs/pension etc.

Doing some research on the matter can someone please confirm that I need to complete a self-assessment form once the tax year has finished and HMRC will calculate what I owe which I believe I have to pay by the end of next January. I would rather pay it in one go than have my tax code adjusted. 

Thanks in advance.

Nearly correct.

You need to register for Self Assessment and complete a return by 31 January next year.

There are two question on the return about collecting tax, one is in relation to the tax owed from the tax year the return relates to and the other is about keeping your current tax code up to date.  Don't ignore either.

The tax return software includes a calculation so when you complete the return you can see the tax calculation and details of how much is owed before filing the return.

alongtimetogoyet

Thank you.

Finally can I just clarify that by filing a self-assessment return that the tax owed is paid in one go and not by an adjustment to my tax code.

Dazed_and_C0nfused

alongtimetogoyet said:

Thank you.

Finally can I just clarify that by filing a self-assessment return that the tax owed is paid in one go and not by an adjustment to my tax code.

No, you have a choice with that.

That's what one of the two question on the return I mentioned relate to.

You are perfectly within your rights to pay the tax direct (by 31 January to avoid being charged interest) but your need to complete your return correctly to get that option.

Look at the information for boxes 2 and 3 on page TRG 14 on the 2022-23 tax return guide.

https://www.gov.uk/government/publications/self-assessment-tax-return-sa100

If you file the return after 30 December you will always have to pay the tax direct to HMRC.

MX5huggy

Note that you will also have to make a payment on account which will be an additional 50% of the tax. So if you’re paying £2000 tax on savings interest in 23-24 in Jan 25 you’ll owe another £1000 of tax the and then another £1000 in July 25. Then you do your tax return and work it out accordingly. https://www.gov.uk/understand-self-assessment-bill/payments-on-account

Dazed_and_C0nfused

MX5huggy said:

Note that you will also have to make a payment on account which will be an additional 50% of the tax. So if you’re paying £2000 tax on savings interest in 23-24 in Jan 25 you’ll owe another £1000 of tax the and then another £1000 in July 25. Then you do your tax return and work it out accordingly. https://www.gov.uk/understand-self-assessment-bill/payments-on-account

It's a little more nuanced than that as there is also an 80/20 rule which could apply to the op as they appear to have some PAYE income so some tax could already be being deducted.

https://www.gov.uk/hmrc-internal-manuals/self-assessment-legal-framework/salf303#:~:text=Payments on account are normally required from any taxpayer who,liability for a tax year.

alongtimetogoyet

Can I also ask why you have to declare any payments made to a pension. I have been using some of my inheritance to pay into a SIPP with Vanguard who obviously claim the 20% tax relief on my behalf. As I am completing the self assessment predominantly for my savings interest I was wondering what implication, if any, declaring pension contributions would have.

Thank you

Dazed_and_C0nfused

alongtimetogoyet said:

Can I also ask why you have to declare any payments made to a pension. I have been using some of my inheritance to pay into a SIPP with Vanguard who obviously claim the 20% tax relief on my behalf. As I am completing the self assessment predominantly for my savings interest I was wondering what implication, if any, declaring pension contributions would have.

Thank you

You only have to declare some types of pension contributions.

Relief at source contributions are the ones that are most common and you only ever receive basic rate tax relief via the pension company.  These are included on the return so that you can receive and intermediate or higher rate relief that is due.  The gross contribution increases your basic rate to facilitate this.

It's possible there will be no impact on your tax liability but you still need to declare RAS contributions on the return.

A return is to declare all taxable income and any relief or deduction due.  You don't just choose which bits you think are worth bothering with!

j_netprofit

What if you honestly just forget to do this?

I assume you'll just get a letter requesting payment maybe with an interest penalty. But really, HMRC know about every single account every one of us has along with how much in in each?

Dazed_and_C0nfused

jay_ftw said:

What if you honestly just forget to do this?

I assume you'll just get a letter requesting payment maybe with an interest penalty. But really, HMRC know about every single account every one of us has along with how much in in each?

I think you're more likely to get a notice to file a return.

With interest being charged on any tax paid after the normal due date of 31 January (irrespective of when the notice to file was issued).

Bigwheels1111

I await a letter requesting me to file a self assessment return after April 2024.

Im lucky its only 2 boxes to fill in.

No tax to pay,