Do I need to pay tax on savings interest?

ColdIron

PloughmansLunch said:

ColdIron said:

Wotulookinat said:

ColdIron said:

On the face of it the only income that you will pay tax on is the one you don't mention - dividends in your non-ISA stocks and shares account. Presumably you will be moving your investments annually into your ISA (which you will use the AEA above to avoid CGT on the sales)

....so, if the s&s investments are 'acc' rather than 'inc' and the dividends are re-invested, is the dividend tax liability only when the investments are sold, or is it when dividends are paid?

'Fraid not on the Inc/Acc issue, you are the beneficiary either way, HMRC doesn't care what you do with them. You are liable annually in the year that the dividends arise in exactly the same way as if they had not been retained within the fund

As the dividends are not paid to you as cash they are harder to identify but your platform will issue an annual Consolidated Tax Certificate after the end of the tax year which will detail them, you can use those details for tax purposes rather than trying to figure it out for yourself

This raises an important point for you though. When you come to sell, part of your apparent gain (sale proceeds - cost) will be those dividends that you have already paid tax on and you don't want to be taxed twice so you can deduct them from that apparent gain

There are several other issues associated with CGT so it is essential that you keep accurate and complete records of all purchases and sales (costs, stamp duty if any, trading costs etc). An unfortunate consequence of holding investments outside of a tax wrapper

I strongly recommend that you make a start on that now, perhaps in Excel, as it will only get harder if you don't

Also... wondering whether I need to do a tax return for the next financial year - I haven't done one since I retired 7 years ago as my finances have been very simple up to now, just state pension, slight SIPP top up and ISA drawings.

I do Self Assessment so I'm not sure of the best way for you, I think you can do it online in your personal Tax account or even just phone them. Perhaps others can comment

Just to quickly piggyback on a relevant thread rather than starting my own, I held units of an acc fund outside of an ISA wrapper for a while before swapping out to the inc. version as I couldn't be bothered with the potential headache. I actually had my consolidated certificate come through from HSBC this morning - it has Dividend Paid £xxx which is clear enough, but also Equalisation £xxx (lower amount) - do I include or ignore this latter figure in my self assesment?

Acc and Inc have their respective issues: dividends in acc and equalisation in inc so it's out of the pan and into the fire. When you buy inc funds between ex-dates you will have have bought some of the dividend accrued to date in the price and will earn the rest. When the distribution is made some will be in the form of real dividends and the rest as a return of capital, the equalisation payment. This reduces your cost and therefore increases your potential capital gain

You can ignore them in your SA if you don't sell but must not forget them. You should account for them when you do sell as may increase your actual gain or cause you to exceed your Annual Exempt Amount

Luckily they are also detailed in your CTC