In or Out of Self Assessment?

watercooled

sheramber said:

watercooled said:

eskbanker said:

watercooled said:

Read Martin's recent post on self-assessment and followed the link to the HMRC page with the questionnaire.  The questionnaire states, as did Martin's post, that you can have up to £10,000 of savings interest without going into self assessment.  However as I understand it, the savings allowance is £1,000 (basic rate taxpayer) before you need to pay tax.  I don't understand how the two figures tie up!  I've been languishing in self assessment following a short self employed period some 10 years ago - and paying tax on my meagre savings income all the while.

The figures represent two different things - if you already self-assess then you can ignore the £10K one, which is simply the threshold above which savings interest income would trigger self-assessment being needed, but that's unrelated to personal savings allowance, i.e. the figure above which tax needs to be paid, except for low or high earners.

Understood, but this seems to imply that one could be receiving up to £9999 in savings income and not paying tax on it, if one is not in self assessment.  I have applied to come out of self assessment now, as I don't fulfil the criteria in HMRC questionnaire, hoping to avoid an irritating annual task, as well as possibly saving some tax (?)..

Just because you do not send in a self assessment return does not mean you do pay tax on savings if you are liable. 

HMRC have other ways of collecting any tax  due.

BAnks etc notify HMRC of interest paid and HMRC will then calculate any tax due me and notify you. 

That's useful, thanks.

watercooled

Albermarle said:

The £10K interest is just an arbitrary figure that HMRC decided that if your earn above that then you should fill in a SA, even if you did not need to do one for other reasons. I think they are considering increasing it. So there are basically 3 scenarios.
1) You earn less than £10K in savings interest and do not need to fill in a SA for other reasons. IN this case HMRC relies on the savings providers to inform them of what interest you have earned, so they can calculate your tax liability.
2) You fill in a SA for other reasons, so you should include any savings interest at whatever level it is
3) You earn over £10K in savings interest, so have to fill in a SA anyway.

Thanks, so I am scenario (2), albeit the reasons for being in SA no longer apply, I have applied to exit from SA now.