Paying tax

moneysaver1978

I am a 40% taxpayer (full time employee in England) so outside ISA, I can get £500 worth of interest per year tax-free.

If I go over it, do I need to do a self assessment? Or will it all be handled automatically with PAYE in the following tax year?

eskbanker

On the face of it, no, you don't need to self-assess solely because you've exceeded the personal savings allowance (it's only if annual interest income exceeds £10K), but might need to for other reasons, so check at

https://www.gov.uk/check-if-you-need-tax-return

If you have a modest income tax liability arising from 2024/25, then HMRC will send you an assessment in late 2025, and adjust your PAYE coding for 2026/27.

maman

I don't know if this applies to OP but I was sent an option of paying off the tax from savings as a lump sum or spreading it through the tax year.

If you have a modest income tax liability arising from 2024/25, then HMRC will send you an assessment in late 2025, and adjust your PAYE coding for 2026/27.

eskbanker

maman said:

I don't know if this applies to OP but I was sent an option of paying off the tax from savings as a lump sum or spreading it through the tax year.

If you have a modest income tax liability arising from 2024/25, then HMRC will send you an assessment in late 2025, and adjust your PAYE coding for 2026/27.

Sure, the default option is to collect via PAYE adjustment, but anyone feeling the need to decline an interest-free loan from HMRC is entitled to do so!

moneysaver1978

Thank you @eskbanker! Looking at my Annual Tax Summary for 2023-2024 on the HMRC portal, I see "Other income (including interest)" of £648.00 which I assume means that I need to pay tax on £148.

This probably is why I get a "You paid too little Income Tax for 6 April 2023 to 5 April 2024" for that interest generated. The tax amount I owe is £63.20.

While I do have some shares, I haven't sold any and I have no other income so the tax payable must be for going over the £500 PSA.

Did I understand this correctly?

eskbanker

Yes, 40% tax on £148 is a few quid short of £63.20 but in the right ball park - if you want any more detailed reconciliation then you'd need to share more detail of the figures on your statement....

moneysaver1978

eskbanker said:

Yes, 40% tax on £148 is a few quid short of £63.20 but in the right ball park - if you want any more detailed reconciliation then you'd need to share more detail of the figures on your statement....

That's great thank you! 

Stma123

Hi Hopefully this is the correct forum
i  was gifted £80k(tax Free) and it is in a 90 day saving account .it is earning around £344 per month ,since July 
This is my personal , only income what is the tax situation on the interest earn’t . 

Dazed_and_C0nfused

Stma123 said:

Hi Hopefully this is the correct forum
i  was gifted £80k(tax Free) and it is in a 90 day saving account .it is earning around £344 per month ,since July 
This is my personal , only income what is the tax situation on the interest earn’t . 

You have to look at the tax year as a whole and what your Personal Allowance is (£11,310 or £12,570) but worst case scenario is you can have £17,310 in interest before tax is payable on it.

Is this really your only taxable income?