Self Assessment for savings interest

Please excuse the very simple question but I'm confused about paying tax on savings interest over £1,000. It's the first year I've ever had to consider this.

I've made about £1200 interest (excluding ISAs) last year. I thought that I therefore would have to complete a self assessment return because of the £200 over the £1000 allowance.

I've just read that you do this if "income from savings or investments was £10,000 or more before tax".

So do I pay tax on the £200, but I don't have to complete a return, as the banks themselves inform the taxman?

Thanks for any clarification.
Save £12k in 2022 thread #7:

Save £10,000 Jan-May 2022 THEN RETIRE!!
Final total for (half) year: -£4,000

Comments

  • You are liable to tax on the full £1,200 but some or all (maximum of £6,000) may be taxed at a 0% tax rate.

    The £1,000 I think you referring to (Personal Savings"Allowance") only applies to middle income earners, low income individuals cannot benefit from it and higher earners are limited to £500. You need to have taxable wages/interest in excess of £16,500 before it applies last year.
    Before you get to the PSA you have the normal Personal Allowance and, for some, the starter savings rate which allows upto £5,000 of interest to be taxed at 0%. The starter rate doesn't apply if your taxable wages/pension/interest is £16,500 or more (last year's figure).

    If you don't already need to complete a self assessment return then this income is unlikely to change that.

    You just need to advise HMRC of the figures and then they can send you a calculation for last year and update your current tax code.

    You can normally pay the tax owed for last year direct or they will alter next year's tax code (2019:20) to collect the tax owed for last year.
  • Thank you Dazed.

    I'm a middle earner and semi retired. I PAYE on my salary and work pension (no state pension yet) so I have never done a tax return. I'll give them a call tomorrow and hope it can just be done by phone.
    Save £12k in 2022 thread #7:

    Save £10,000 Jan-May 2022 THEN RETIRE!!
    Final total for (half) year: -£4,000
  • Well if your existing pension income is more than £16,500 (last year) but less than £43,000 you miss out on the starter savings rate but will get the full PSA rate of £1,000 taxed at 0% so should only have minimal tax to pay for last year (probably £41-42).
  • The hassle of going through the self assessment process for £40 is a bit of a pain (for both me and the Taxman!).

    That's why I was wondering if only larger amounts necessitate the self assessment completion on line ( "income from savings or investments was £10,000 or more before tax").

    Anyway I'll give them a call. Thanks again.
    Save £12k in 2022 thread #7:

    Save £10,000 Jan-May 2022 THEN RETIRE!!
    Final total for (half) year: -£4,000
  • There should be no need for a self assessment return just for this.
  • polymaff
    polymaff Posts: 3,903
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    edited 20 May 2018 at 1:40PM
    The hassle of going through the self assessment process for £40 is a bit of a pain (for both me and the Taxman!).

    That's why I was wondering if only larger amounts necessitate the self assessment completion on line ( "income from savings or investments was £10,000 or more before tax").

    Anyway I'll give them a call. Thanks again.

    Hassle? What hassle in your relatively simple case? You'll have more hassle trying to get through to HMRC on the phone than the 10-15 minutes you'll need to fill in the online SA.

    What is more, with online SA you've evidence of what information you've given HMRC - and of their calculation.

    Plus, you are not relying on others getting it right - and if they don't, that's when you'll really discover what hassle means !
  • badmemory
    badmemory Posts: 7,626
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    You could actually just write them a letter or wait to see whether their figures are correct because you will need to check them carefully. The thing you really need to watch out for is if they adjust your tax code to take into consideration the interest for the current year. They are trying to stop self assessment.
  • Thank you all for your comments. This is the only year I'm likely to get over £1000 interest so it's not going to be a recurring issue.
    Save £12k in 2022 thread #7:

    Save £10,000 Jan-May 2022 THEN RETIRE!!
    Final total for (half) year: -£4,000
This discussion has been closed.
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