Paying tax on interest

myself321

I am employed and self employed.

As I understand it , you need to declare what interests you have earned on savings in your self employment tax return and then pay the tax due. 

But also if you are employed it will come out of your pay as HMRC will change your tax code accordingly to collect it in the next financial year

Obviously I don't want to pay this twice, which one above takes  presidents over the other?

Thank you

eskbanker

If you self-assess, then you declare all taxable income via that route - subsequent collection of any tax due will depend on how much it is but if you have PAYE income then you can elect to have it deducted there if below £3K.

myself321

I assume by declaring its via self assessment, I'm going forward my tax code wouldn't change as there's nothing to collect on savings interest as its already been paid?

Just hope HMRC systems are good enough to interact with each other 

Thank you for your help 

eskbanker

myself321 said:

I assume by declaring its via self assessment, I'm going forward my tax code wouldn't change as there's nothing to collect on savings interest as its already been paid?

Just hope HMRC systems are good enough to interact with each other 

Thank you for your help 

It's all part of the same process, so not sure why you see a difference?  Your PAYE tax code will change if you owe <£3K tax on savings interest in a previous year (and they'll assume similar income for future years too, by default), or otherwise you'd be asked to pay it with anything else owing from self-employment, but there wouldn't be any double-dipping involved, i.e. either you pay via PAYE deductions or by settling an annual bill.

myself321

Why would they need to assume for future years to , when the banks send them the exact amount of interest earned on savings ,? 

Sorry if it's a silly question I am new to all this , thank you for your help very much appreciated

Dazed_and_C0nfused

myself321 said:

Why would they need to assume for future years to , when the banks send them the exact amount of interest earned on savings ,? 

Sorry if it's a silly question I am new to all this , thank you for your help very much appreciated

A lot depends on how you answer two specific questions on your Self Assessment return.

One is do you want HMRC to use the information from your return (the one you are filing now) to keep your 2025-26 tax code upto date.

The second is do you want any tax owed for 2024-25 (as calculated from the tax return you are filing now) to be included in your 2026-27 tax code.

If you prefer to keep things simple just answer those questions so your tax code isn't messed with.  You will then have to pay whatever you owe direct to HMRC by 31 January 2026.  You may also have payments on account for the next tax year (which you pay direct to HMRC).

myself321

I wamt keep my tax code the same and pay the saving interest tax in one sum.

So do I answer the above questions, as question 1 yes and question 2 no?

Many thanks 

Dazed_and_C0nfused

myself321 said:

I wamt keep my tax code the same and pay the saving interest tax in one sum.

So do I answer the above questions, as question 1 yes and question 2 no?

Many thanks 

Not sure if they are yes/no online but when you come to do your return you will see them and answer in whichever way works best for you.

They are questions 2 and 3 on page TR6 of the paper SA100 you can view here.

https://www.gov.uk/government/publications/self-assessment-tax-return-sa100

myself321

When putting in the amount of untaxed interest, do you put the full amount earned, with HMRC disregarding the first £1000, basic rate tax payer, then bill you 20% on the remaining interest?

Many thanks 

eskbanker

myself321 said:

When putting in the amount of untaxed interest, do you put the full amount earned, with HMRC disregarding the first £1000, basic rate tax payer, then bill you 20% on the remaining interest?

Yes, it's all taxable interest, even if £1K may be taxed at 0% (as opposed to being 'disregarded' as such).

Dazed_and_C0nfused

myself321 said:

When putting in the amount of untaxed interest, do you put the full amount earned, with HMRC disregarding the first £1000, basic rate tax payer, then bill you 20% on the remaining interest?

Many thanks 

You include all taxable income on your return.

HMRC won't disregard anything though.  But upto £6,000 interest may be taxed at 0% (assuming Personal Allowance has all been used elsewhere).  

The tax due will depend on your total income and rate bands.  Could be £1,000 taxed at 0% and the balance at 20%.  But it won't be like that for everyone.

The SA calculation will show you exactly how the interest has been taxed.