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

Dazed_and_C0nfused

Harry227 said:

Angelica123 said:

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). 

"Unless you earn over 10k in interest, you don't need to fill in a tax return for interest".  That's interesting.  How do HMRC determine how much tax you need to pay?  Do building societies and banks inform them that you've earned interest of x amount over the £1000, and they then alter your tax code?  

Yes banks have to report the interest to HMRC.

No they don't factor in the £1,000 savings nil rate band.  Or the £5,000 savings starter rate band.  Or the Personal Allowance.

If they did that you could have accounts with 10 banks each earning £1,000 and none would be reported.

HMRC are responsible for determining the tax liability (where a Self Assessment return isn't needed).

Malchester

I was already registered for self assessment so, even though my taxable interest is not £10000 (around £7000) I completed the online self assessment (15 minutes) and everything is sorted very quickly. Much prefer this to waiting for HMRC being informed of interest received by banks and building societies. 

Harry227

flaneurs_lobster said:

Harry227 said:

Angelica123 said:

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). 

"Unless you earn over 10k in interest, you don't need to fill in a tax return for interest".  That's interesting.  How do HMRC determine how much tax you need to pay?  Do building societies and banks inform them that you've earned interest of x amount over the £1000, and they then alter your tax code?  

They report all your earned interest.

Yes, that makes sense.  I first became aware of this issue from the Newcastle Building Society website and under one of their savings products was the notification that "Tax Status: Interest will be paid gross which means no tax is deducted. It is your responsibility to pay any tax due, based on your individual circumstances.".  

Bigwheels1111 above referred to setting up a self-assessment online, and it appeared from their description, fairly straightforward.  

Although presumedly I could take this route which might work like this (apologies for naivety in these issues!). 

I log into my HMRC app on my phone.

Click on PAYE

View my PAYE Income Tax summary, and then scroll down to 'Add missing income'

and then follow the various sections and input all the interest earned from taxable savings.

This then alters my tax code for that year (that year only?)?

The above suggests that this is not the same as registering for self-assessment (but I may be wrong )

What's very confusing for me is that this year I've paid a capital gains tax liability on some property, and had to register to pay this online (with the help of an accountant) having set up a separate "Capital Gains Tax on UK property account" with HMRC. The accountant explained that HMRC now have this provision for a one-off CGT payment, which avoids the previous system where an individual had to register and set up self-assessment, and then had the issue of later closing that self-assessment account for the following year.

This seems an improvement as the last time I had a CGT payment to make, some 10 years ago, when HMRC made a major hash of it (despite support also from an accountant) as they set up two accounts, one in my full name and another simultaneously in my first and second christian names, and proceeded to demand payment on both.  Multiple long telephone calls, long waits, conflicting advice, failure of staff to implement promised actions, plus numerous emails over several months leading to my making a formal complaint which proved successful, if somewhat emotionally draining. 

Yet, I note in one of the emails I've recently received regarding the recent CGT from HMRC that it states:

"If you need to file a Self Assessment tax return

You’ll need to provide details from this return in your Self Assessment tax return."

Ugh!! "if' being the operative word, and it looks like that would be the case if I earn over £1000 taxable interest on any savings.

OR...

CGT paid - tick and NFA (as tax already paid for this one-off liability).

Use HMRC app to add additional income from savings interest?

So actually no need for self-assessment if the app is /can be utilised in this manner - hopefully. 

Thank you for your patience! 

eskbanker

Self-assessment is a process to formally declare all of your actual taxable income for the previous tax year, in order to calculate a definitive figure for any outstanding tax liability.

The process of using one's online personal tax account to nominate projected income figures for the current tax year is simply a mechanism to improve the accuracy of PAYE tax coding, but isn't a substitute for declaring final actual numbers.

Dazed_and_C0nfused

And if you additional taxable income (even if taxed at 0%) in the same tax year as the Capital Gains then that could impact your CGT liability and require a revision to the CGT already paid.

Harry227

Dazed_and_C0nfused said:

And if you additional taxable income (even if taxed at 0%) in the same tax year as the Capital Gains then that could impact your CGT liability and require a revision to the CGT already paid.

Good point. It won't in my case fortunately.