Mother In-Law exceeded Personal Allowance

Bosewave

My mother in law is turning 80 this year and receives a partial state pension and interest on savings 

pension of £8,750 per year
interest on savings at £6,000 per year
= £14,750 annual income

given the Personal Allowance is £12,750, presumably she’s liable for tax on £2,000

My question is, will HMRC collect this automatically through adjusting down her pension payments or does she have to go through the hassle of submitting a self assessment to declare it?

What if she just does nothing, will HMRC know? She has gone over the limit 2 years consecutively and only just realised and not heard anything from HMRC regarding this

TadleyBaggie

I don't believe she will be liable for tax, on top of the regular personal allowance she will get the £1000 savings allowance. The next £5000 is taxable but at 0%. So if her total income is less than £18,570 there should be no tax to pay.

https://www.gov.uk/apply-tax-free-interest-on-savings

Dazed_and_C0nfused

Bosewave said:

My mother in law is turning 80 this year and receives a partial state pension and interest on savings 

pension of £8,750 per year
interest on savings at £6,000 per year
= £14,750 annual income

given the Personal Allowance is £12,750, presumably she’s liable for tax on £2,000

My question is, will HMRC collect this automatically through adjusting down her pension payments or does she have to go through the hassle of submitting a self assessment to declare it?

What if she just does nothing, will HMRC know? She has gone over the limit 2 years consecutively and only just realised and not heard anything from HMRC regarding this

You are overlooking the savings starter rate band.  This is a 0% tax rate that, in your mother in laws situation, means the first £5,000 of interest can be taxed at 0%.

Even if that were fully used she would then have the £1,000 savings nil rate band (aka Personal Savings Allowance), a second 0% tax rate.

Befor neither of those can be used she has had spare Personal Allowance of £3,820.  So she's nowhere near having to pay any tax.