Declaring savings interest

Dazed_and_C0nfused

Middle_of_the_Road said:

Dazed_and_C0nfused said:

slinger2 said:

Dazed_and_C0nfused said:

Monanore said:

Dazed_and_C0nfused said:

slinger2 said:

What about those of us that don't self assess? I had untaxed investment income of ~£4000 in 2023/24. Do I tell them what I think the total is or do I just let HMRC work it out when they've got all data.

It depends, if it's interest from a bank or building society you leave it to HMRC.

If it's dividends you need to notify them.  

@slinger2

That's right :  if your 'investment' is a bank or BSoc account and you do nothing then HMRC will take the figures from their BBSI feed around November '24 and issue a calculation.

But you might be wise to tell them now.  Here's what I think :

As you are in PAYE, not telling them about it during 23-24 means that they will have deducted ~800 too little, in which case they may reduce your tax code by ~4000 for 24-25 to recoup it, which can lead to problems as there are not then many months left in the tax year.   Furthermore,  in the absence of any other information they will assume interest in one tax year will be the same in the next, carry it forward as an estimate and again adjust your tax code.

So I think the best way to avoid complications is to give them a reasonable estimate early in a tax year so that they collect about the right amount through PAYE.

HMRC won't reduce your 2024-25 tax code now (or later this tax year) to start collecting tax due for 2023-24.

They might (later this tax year) reduce your 2024-25 tax code to start collecting extra tax towards what they estimate you will need to pay for 2024-25 but not for anything owed from 2023-24.

Indeed. They've reduced my tax code for 2024-25 based on the interest I got in 2022-23 (which was £2k, so they've reduced it by £1k). So my tax code is now 200L (personal allowance - state pension - £1k = £2k). Given the way interest rates have gone in the last couple of years I'm thinking the tax code will go negative pretty soon, if that's possible.

It is, they are called K codes.

The employer or pension payer adds a national amount to your pay or pension before calculating the tax due.

Should that read notional?

https://www.gov.uk/hmrc-internal-manuals/self-assessment-manual/sam121490

It should!

But a really awful K code might seem like the national debt is being added!

Monanore

Bobziz said:

I'm dealing with a similar issue now and have been on the phone to HMRC today. I had to read them the SAIM guidance related to interest not being subject to tax unless it's accessible, as they weren't aware and kept talking about interest being taxable if it is "credited" to your account.

Long story short, when NW send HMRC the interest paid records, I'll then need to send them evidence as to why the interest isn't accessible and therefore isn't taxable. 

@Bobziz

You are quite right : sometimes they quote the SAIM guidance, and sometimes take the "when credited" line.

Could I offer the following thoughts ?:

1. As far as I know all building societies send interest for each year ( except NS&I ).  This is what their guidance on filling out the BBSI return actually tells them to do ( " when paid or credited " - no mention of accessibility. )
2. Accessibility is never cut and dried even on fixed bonds with no normal access even by penalty.  T&C's vary : for instance one enquirer asked their society this question and was told that the SAIM rule did not apply because that particular product allowed the saver the option of paying interest away at the start, even if they did not take the option.  Apparently HMRC concurred.
3. PAYE taxpayers are in any case locked to what the societies send : HMRC will not change the "feed".
4. I suspect SA taxpayers will mostly prefer to declare in-year; not only to keep in line with what is actually sent, but also because compounding on a large amount might push them into higher tax in the final year.
5. It's interesting that your enquiry concerns Nationwide.  They were the only building society to allow access to fixed bonds ( under penalty ) during the term until recently, when they changed their conditions to disallow access like all other societies.  It's conceivable ( but I think unlikely ) that they might decide to delay sending interest until the final year on these new products; are you going to ask them ?
   

Bobziz

Monanore said:

Bobziz said:

I'm dealing with a similar issue now and have been on the phone to HMRC today. I had to read them the SAIM guidance related to interest not being subject to tax unless it's accessible, as they weren't aware and kept talking about interest being taxable if it is "credited" to your account.

Long story short, when NW send HMRC the interest paid records, I'll then need to send them evidence as to why the interest isn't accessible and therefore isn't taxable. 

@Bobziz

You are quite right : sometimes they quote the SAIM guidance, and sometimes take the "when credited" line.

Could I offer the following thoughts ?:

1. As far as I know all building societies send interest for each year ( except NS&I ).  This is what their guidance on filling out the BBSI return actually tells them to do ( " when paid or credited " - no mention of accessibility. ) I asked NW this question last year and they confirmed that they report interest annually regardless of whether it's accessible or not.
2. Accessibility is never cut and dried even on fixed bonds with no normal access even by penalty.  T&C's vary : for instance one enquirer asked their society this question and was told that the SAIM rule did not apply because that particular product allowed the saver the option of paying interest away at the start, even if they did not take the option.  Apparently HMRC concurred. The bonds that I'm dealing with are fixed rate online, issued Oct 2022. T&C's state "If you don’t close your account within the 14 day period, you can’t normally take any money out of your account or close it before the end of the fixed term" & in their summary information "Once the cancellation period has ended, you can’t take out any money during the fixed term." On their difference between online bonds and e-bonds document - "Interest is paid annually on the anniversary of account opening and on maturity. It can only be paid into the bond, not into another account " This is hopefully pretty conclusive evidence.
3. PAYE taxpayers are in any case locked to what the societies send : HMRC will not change the "feed". I am a SA taxpayer, but I was told that I would need to write in with evidence showing that the "feed" was wrong, i.e. that the interest credited was not accessible and therefore not taxable. Surely PAYE taxpayers could also write in if they wanted to ?
4. I suspect SA taxpayers will mostly prefer to declare in-year; not only to keep in line with what is actually sent, but also because compounding on a large amount might push them into higher tax in the final year. Agreed. For my situation it is beneficial to have all interest earned at maturity. 
5. It's interesting that your enquiry concerns Nationwide.  They were the only building society to allow access to fixed bonds ( under penalty ) during the term until recently, when they changed their conditions to disallow access like all other societies.  It's conceivable ( but I think unlikely ) that they might decide to delay sending interest until the final year on these new products; are you going to ask them ? Interest has been credited to the accounts and as point 1, I've been told that they will report it annually to HMRC.
   

thanks for your thoughts @Monanore responses in bold above.

Dazed_and_C0nfused

I am a SA taxpayer, but I was told that I would need to write in with evidence showing that the "feed" was wrong, i.e. that the interest credited was not accessible and therefore not taxable. Surely PAYE taxpayers could also write in if they wanted to ?

Can you used some context to that as it seems utter nonsense.

Have you been subset to a formal investigation by HMRC 🤔

If not then why would you need to do anything but complete your tax return as normal?

You could add a "white space" note to the return if you really wanted to but the onus is on HMRC to open an enquiry (investigation) if they feel your Self Assessment is wrong.

Bobziz

Dazed_and_C0nfused said:

I am a SA taxpayer, but I was told that I would need to write in with evidence showing that the "feed" was wrong, i.e. that the interest credited was not accessible and therefore not taxable. Surely PAYE taxpayers could also write in if they wanted to ?

Can you used some context to that as it seems utter nonsense.

Have you been subset to a formal investigation by HMRC 🤔

If not then why would you need to do anything but complete your tax return as normal?

You could add a "white space" note to the return if you really wanted to but the onus is on HMRC to open an enquiry (investigation) if they feel your Self Assessment is wrong.

yes, sorry, that it a little confusing, I was trying to keep the thread simple.

The online bonds were held by my late mother, who also held an investment bond which pays out on death. It's my understanding that I'll need to do a self-assessment for her in relation to the investment bond re top slicing etc to demonstrate that no further tax is due. In order to demonstrate that no further tax is due, I'll need to demonstrate that her income was below the higher rate tax threshold, and in order to do that, I'll need to evidence that her NW online bond interest should not be treated as income for her for 23/24, but should be treated as estate income for 24/25, or whenever the executor, me, closes the accounts.

If you can see a simpler way through then I'd be very grateful to hear it.

Monanore

@Bobziz

Thanks for your replies which were very helpful.

My condolences to you; it must be upsetting to have tax wrangles as well.

The only thing I can think of is that Nationwide probably have a 'bereavement' team who might have the specialist knowledge that you need.

Good luck.

Monanore

@Albermarle

Hi.  Hope you're still monitoring.

You said :

Just checked and now its there !
Hopefully this means it should be treated by HMRC as a 23/24 payment, although strictly it should be taxable when it is available in 25/26 ( see many previous threads over this issue.

Can I ask,

1. Was your NW 23/24 interest in the BBSI feed for Nationwide ?

2. Is the bond one where withdrawals are not allowed, i.e. taken out after they changed their previous policy of allowing withdrawals under penalty ?

Thanks a lot.