Tax on savings interest above £1000 - do I need to complete a self-assessment?

Harry227

I'm currently receiving an occupational pension for which tax is paid at source.  This year, following the sale of a property, I've acquired a lump sum.  I've paid the CGT on this through the help of an accountant.  All sorted.  However, I now have about £80,000 remaining (as of the end of August this year) which is sitting currently in a building society instant access savings account.  All my other savings are in ISAs so (well, until the next budget at least) tax free. I've maxed out my ISA payments for this year.

The £80,000 is currently earning an interest rate of 3.25%.  It's just put there at the moment as a holding account.  The interest for a year on that sum will be £2600, so over my £1000 saving's allowance.  (My pension will presumedly use up all of my £12570 allowance, and the CGT payment was based on this too).

According to the Gov. site designed to check if I need to send a tax return, it seems that answering all the questions (e.g. my income for this year, only due to the lump sum, would be between £50,000 - £150000)  https://www.gov.uk/check-if-you-need-tax-return,  apparently I do not have to do a self-assessment.

But...can I trust (in an ideal world I know!) that HMRC will change my tax code to account for any interest accrued on the £80,000.  Or, do I need to do something extra myself to ensure I'm not 'getting into trouble' with tax issues?  Will my building society contact the HMRC to indicate I've an account and taxable interest is being earned?

To give context.  Most of my working life I've been PAYE, so tax issues and self-assessment have not been something I'm familiar with. So please excuse any naivety above, or any daft questions. 

Thank you in advance for all helpful advice.

Bigwheels1111

You get up to a total of £18,570 tax free.

£12,570 can be Wages, pension or interest tax free.

£ 5,000 Starter savings rate.

£ 1,000 Personal savings rate.

So work out

Pension say 14,000

This would be £18,570 - £14,00 = £4,570 of tax free interest.

Looking at your info, I would find a better rate for your saving. One year fixed is paying 5%

That would be an extra £1400 interest that you should not have to pay tax on.

Harry227

Bigwheels1111 said:

You get up to a total of £18,570 tax free.

£12,570 can be Wages, pension or interest tax free.

£ 5,000 Starter savings rate.

£ 1,000 Personal savings rate.

So work out

Pension say 14,000

This would be £18,570 - £14,00 = £4,570 of tax free interest.

Looking at your info, I would find a better rate for your saving. One year fixed is paying 5%

That would be an extra £1400 interest that you should not have to pay tax on.

That's really helpful info. - thank you.  As my pension currently is just over £20,000 I don't think the starter rate seems to apply to me.  Yes, you're correct, that 3.25% interest rate can be easily bettered.  It's just there, hopefully, until I can think what's best to do.  

Dazed_and_C0nfused

Harry227 said:

I'm currently receiving an occupational pension for which tax is paid at source.  This year, following the sale of a property, I've acquired a lump sum.  I've paid the CGT on this through the help of an accountant.  All sorted.  However, I now have about £80,000 remaining (as of the end of August this year) which is sitting currently in a building society instant access savings account.  All my other savings are in ISAs so (well, until the next budget at least) tax free. I've maxed out my ISA payments for this year.

The £80,000 is currently earning an interest rate of 3.25%.  It's just put there at the moment as a holding account.  The interest for a year on that sum will be £2600, so over my £1000 saving's allowance.  (My pension will presumedly use up all of my £12570 allowance, and the CGT payment was based on this too).

According to the Gov. site designed to check if I need to send a tax return, it seems that answering all the questions (e.g. my income for this year, only due to the lump sum, would be between £50,000 - £150000)  https://www.gov.uk/check-if-you-need-tax-return,  apparently I do not have to do a self-assessment.

But...can I trust (in an ideal world I know!) that HMRC will change my tax code to account for any interest accrued on the £80,000.  Or, do I need to do something extra myself to ensure I'm not 'getting into trouble' with tax issues?  Will my building society contact the HMRC to indicate I've an account and taxable interest is being earned?

To give context.  Most of my working life I've been PAYE, so tax issues and self-assessment have not been something I'm familiar with. So please excuse any naivety above, or any daft questions. 

Thank you in advance for all helpful advice.

Do you mean this tax year?

If so what makes you think it's all sorted?  Are you 100% certain that the CGT already paid will be perfectly correct?  If not won't you be filing a Self Assessment return as well to finalise the CGT position?

Harry227

Dazed_and_C0nfused said:

Harry227 said:

I'm currently receiving an occupational pension for which tax is paid at source.  This year, following the sale of a property, I've acquired a lump sum.  I've paid the CGT on this through the help of an accountant.  All sorted.  However, I now have about £80,000 remaining (as of the end of August this year) which is sitting currently in a building society instant access savings account.  All my other savings are in ISAs so (well, until the next budget at least) tax free. I've maxed out my ISA payments for this year.

The £80,000 is currently earning an interest rate of 3.25%.  It's just put there at the moment as a holding account.  The interest for a year on that sum will be £2600, so over my £1000 saving's allowance.  (My pension will presumedly use up all of my £12570 allowance, and the CGT payment was based on this too).

According to the Gov. site designed to check if I need to send a tax return, it seems that answering all the questions (e.g. my income for this year, only due to the lump sum, would be between £50,000 - £150000)  https://www.gov.uk/check-if-you-need-tax-return,  apparently I do not have to do a self-assessment.

But...can I trust (in an ideal world I know!) that HMRC will change my tax code to account for any interest accrued on the £80,000.  Or, do I need to do something extra myself to ensure I'm not 'getting into trouble' with tax issues?  Will my building society contact the HMRC to indicate I've an account and taxable interest is being earned?

To give context.  Most of my working life I've been PAYE, so tax issues and self-assessment have not been something I'm familiar with. So please excuse any naivety above, or any daft questions. 

Thank you in advance for all helpful advice.

Do you mean this tax year?

If so what makes you think it's all sorted?  Are you 100% certain that the CGT already paid will be perfectly correct?  If not won't you be filing a Self Assessment return as well to finalise the CGT position?

I'm pretty sure the CGT from the sale of the property has been sorted, as it was completed for me by an accountant and the payment has been received and acknowledged by the HMRC.

Helpfully, since I sold another property some 10 years ago, and as a PAYE worker at that time had to register and open a self-assessment for that CGT payment, it seems that HMRC now allow for a single payment, in my circumstances, without registering for self-assessment for PAYE payees.  All online - much easier.

WindfallWendy

I'm in a similar position keen to avoid paying tax on interest gained by virtue of a big lump sum. I'm going to max out a Premium Bonds account with £50k of it, as any returns on that are tax free, and chances are the return is equivalent to 3-4%

And then every tax year cash in £20k for an ISA, until I'm all out of premium bonds.

But don't buy the Premium bonds until the end of October now, as they won't be eligible for the draw until end of November so you might as well hold onto the funds for another 4 weeks 👍

35har1old

Harry227 said:

Dazed_and_C0nfused said:

Harry227 said:

I'm currently receiving an occupational pension for which tax is paid at source.  This year, following the sale of a property, I've acquired a lump sum.  I've paid the CGT on this through the help of an accountant.  All sorted.  However, I now have about £80,000 remaining (as of the end of August this year) which is sitting currently in a building society instant access savings account.  All my other savings are in ISAs so (well, until the next budget at least) tax free. I've maxed out my ISA payments for this year.

The £80,000 is currently earning an interest rate of 3.25%.  It's just put there at the moment as a holding account.  The interest for a year on that sum will be £2600, so over my £1000 saving's allowance.  (My pension will presumedly use up all of my £12570 allowance, and the CGT payment was based on this too).

According to the Gov. site designed to check if I need to send a tax return, it seems that answering all the questions (e.g. my income for this year, only due to the lump sum, would be between £50,000 - £150000)  https://www.gov.uk/check-if-you-need-tax-return,  apparently I do not have to do a self-assessment.

But...can I trust (in an ideal world I know!) that HMRC will change my tax code to account for any interest accrued on the £80,000.  Or, do I need to do something extra myself to ensure I'm not 'getting into trouble' with tax issues?  Will my building society contact the HMRC to indicate I've an account and taxable interest is being earned?

To give context.  Most of my working life I've been PAYE, so tax issues and self-assessment have not been something I'm familiar with. So please excuse any naivety above, or any daft questions. 

Thank you in advance for all helpful advice.

Do you mean this tax year?

If so what makes you think it's all sorted?  Are you 100% certain that the CGT already paid will be perfectly correct?  If not won't you be filing a Self Assessment return as well to finalise the CGT position?

I'm pretty sure the CGT from the sale of the property has been sorted, as it was completed for me by an accountant and the payment has been received and acknowledged by the HMRC.

Helpfully, since I sold another property some 10 years ago, and as a PAYE worker at that time had to register and open a self-assessment for that CGT payment, it seems that HMRC now allow for a single payment, in my circumstances, without registering for self-assessment for PAYE payees.  All online - much easier.

If HMRC ask you to fill in a self assessment return you will need to record the CGT again as per my accountant 

Harry227

WindfallWendy said:

I'm in a similar position keen to avoid paying tax on interest gained by virtue of a big lump sum. I'm going to max out a Premium Bonds account with £50k of it, as any returns on that are tax free, and chances are the return is equivalent to 3-4%

And then every tax year cash in £20k for an ISA, until I'm all out of premium bonds.

But don't buy the Premium bonds until the end of October now, as they won't be eligible for the draw until end of November so you might as well hold onto the funds for another 4 weeks 👍

Yes, that's a great idea (in theory), that I'm seriously considering. The only issue is the absolute pain using/accessing HMRC or NS&I logins, etc. can be.  For example, I've just made an exploration of the registering process for PBs and I've already been told, part way through, that I've been logged out and have to start again because I've pressed the 'back button'. I hadn't. This has happened several times on the safari browser, although a quick google check shows this have been a widely reported problem across browsers ( cue sinking heart at having to deal with a Government agency!). 

There is an NS&I app you can download on the app store onto a mobile phone, but there too the rating is 1.4 stars and the reviews detail a whole history of frustrations recorded by very many users, or those attempting to become users. Still, I'll have a go again tomorrow. 

I've also been trying to top up my NI state pension as I've a couple of years where my contributions weren't made.  Again, that now has to be made over the phone and after several attempts to call and long waits of 20 plus minutes I've just been cut off.  The incompetence of Government agencies is breathtaking.  Hey ho. 

wmb194

Harry227 said:

WindfallWendy said:

I'm in a similar position keen to avoid paying tax on interest gained by virtue of a big lump sum. I'm going to max out a Premium Bonds account with £50k of it, as any returns on that are tax free, and chances are the return is equivalent to 3-4%

And then every tax year cash in £20k for an ISA, until I'm all out of premium bonds.

But don't buy the Premium bonds until the end of October now, as they won't be eligible for the draw until end of November so you might as well hold onto the funds for another 4 weeks 👍

Yes, that's a great idea (in theory), that I'm seriously considering. The only issue is the absolute pain using/accessing HMRC or NS&I logins, etc. can be.  For example, I've just made an exploration of the registering process for PBs and I've already been told, part way through, that I've been logged out and have to start again because I've pressed the 'back button'. I hadn't. This has happened several times on the safari browser, although a quick google check shows this have been a widely reported problem across browsers ( cue sinking heart at having to deal with a Government agency!). 

There is an NS&I app you can download on the app store onto a mobile phone, but there too the rating is 1.4 stars and the reviews detail a whole history of frustrations recorded by very many users, or those attempting to become users. Still, I'll have a go again tomorrow. 

I've also been trying to top up my NI state pension as I've a couple of years where my contributions weren't made.  Again, that now has to be made over the phone and after several attempts to call and long waits of 20 plus minutes I've just been cut off.  The incompetence of Government agencies is breathtaking.  Hey ho. 

Try using Chrome, I've had no issues.

Eco_Miser

Harry227 said:

For example, I've just made an exploration of the registering process for PBs and I've already been told, part way through, that I've been logged out and have to start again because I've pressed the 'back button'. I hadn't.

'Back button', 'forward button', 'refresh' (F5), or anything else that causes a request the server isn't expecting causes the same logout and message.

But it's not just NS&I, some banks (eg TSB) do similar.

Angelica123

wmb194 said:

Harry227 said:

WindfallWendy said:

I'm in a similar position keen to avoid paying tax on interest gained by virtue of a big lump sum. I'm going to max out a Premium Bonds account with £50k of it, as any returns on that are tax free, and chances are the return is equivalent to 3-4%

And then every tax year cash in £20k for an ISA, until I'm all out of premium bonds.

But don't buy the Premium bonds until the end of October now, as they won't be eligible for the draw until end of November so you might as well hold onto the funds for another 4 weeks 👍

Yes, that's a great idea (in theory), that I'm seriously considering. The only issue is the absolute pain using/accessing HMRC or NS&I logins, etc. can be.  For example, I've just made an exploration of the registering process for PBs and I've already been told, part way through, that I've been logged out and have to start again because I've pressed the 'back button'. I hadn't. This has happened several times on the safari browser, although a quick google check shows this have been a widely reported problem across browsers ( cue sinking heart at having to deal with a Government agency!). 

There is an NS&I app you can download on the app store onto a mobile phone, but there too the rating is 1.4 stars and the reviews detail a whole history of frustrations recorded by very many users, or those attempting to become users. Still, I'll have a go again tomorrow. 

I've also been trying to top up my NI state pension as I've a couple of years where my contributions weren't made.  Again, that now has to be made over the phone and after several attempts to call and long waits of 20 plus minutes I've just been cut off.  The incompetence of Government agencies is breathtaking.  Hey ho. 

Try using Chrome, I've had no issues.

I would echo this. Used HMRC and NS&I with no problems both on phone and on laptop using Chrome for years with no issues. 

Remember to make sure you are getting the best return (don't focus solely on tax). If you get a 1 year fixed that pays interest at maturity - then interest will fall in next year's tax year. Same with regular savers with products giving interest over 7%. 

Unless you earn over 10k in interest, you don't need to fill in a tax return for interest (although obviously if you are filling it for other reasons then you would need to include it on there).