ISA interest & hmrc

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  • eskbanker
    eskbanker Posts: 31,076 Forumite
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    colsten wrote: »
    Dazed_and_confused wrote: »
    There is no actual allowance for savings interest.
    There is. https://www.gov.uk/apply-tax-free-interest-on-savings
    D&C is making the point that it's not an allowance in the strict sense of the word (despite the term being (mis)used even in official documents), but a nil-rate band, i.e. the interest income within that band is taxable at 0% rather than being tax-free as such.

    While this may seem a pedantic distinction, a recent poster on this thread incurred a bill of £2486 as a direct result of the difference between 'tax-free' and 'taxable at 0%':
    https://forums.moneysavingexpert.com/showthread.php?t=5991433
  • lisyloo
    lisyloo Posts: 29,617 Forumite
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    Rich2808 wrote: »
    Unless of course you had an ISA with Al Rayan bank - but that is another story!

    Do you have a link to that story?
    I did have an al rayan isa And didn’t realise they are different from a tax point of view as it’s a cash isa.
  • eskbanker
    eskbanker Posts: 31,076 Forumite
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    lisyloo wrote: »
    Do you have a link to that story?
    I did have an al rayan isa And didn’t realise they are different from a tax point of view as it’s a cash isa.
    They're not different (in the context of tax-free ISA status) and aren't reportable to HMRC but Al Rayan erroneously reported some accounts as taxable, as per https://forums.moneysavingexpert.com/showthread.php?p=75554675#post75554675
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
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    There is. https://www.gov.uk/apply-tax-free-interest-on-savings

    Just because gov.uk refers to it as an allowance doesn't mean it is one.

    Same applies to the dividend "allowance".

    As eskbanker has explained it is really a 0% tax rate.

    The recent poster who ended up with a £2.4k bill as a result of having about £300 of interest taxed at 0% is one example of the difference this makes.

    Ask anyone who had ended up with a reduced Married Couple's Allowance, larger High Income Child Benefit Charge, lost their Marriage Allowance tax credit or has ended up with a reduced Personal Allowance if it's a tax-free allowance or not :(
  • Aidanmc
    Aidanmc Posts: 737 Forumite
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    On another note, I sold some shares (non ISA) before 5 April, had the shares quite a number of years. Purchase cost £2000 and sold for £4900. Is it necessary to make this declaration to hmrc on self assessment as £2900 Capital gains?
    thanks
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
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    What other capital gains (or loss) did you have in that tax year?
  • Aidanmc
    Aidanmc Posts: 737 Forumite
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    Dazed_and_confused wrote: »
    What other capital gains (or loss) did you have in that tax year?
    That's all, 2900.
  • Reed_Richards
    Reed_Richards Posts: 4,169 Forumite
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    Aidanmc wrote: »
    On another note, I sold some shares (non ISA) before 5 April, had the shares quite a number of years. Purchase cost £2000 and sold for £4900. Is it necessary to make this declaration to hmrc on self assessment as £2900 Capital gains?
    thanks
    No, provided you did not dispose of any other assets, whether or not for gain.

    See https://www.gov.uk/capital-gains-tax/work-out-need-to-pay and read the section "If your total gains are less than the tax-free allowance"
    Reed
  • capital0ne
    capital0ne Posts: 872 Forumite
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    colsten wrote: »
    If your interest on the ISA brings you over your personal savings interest allowance (SIA), you need to speak to HMRC and have the ISA profit taken off your taxable income. If your total interest incl. the profit on the Al Rayan ISA is below the SIA, it's all a bit academic.
    You are not required to declare interest from an ISA nor any capital gains - it's all tax free. The £1,000 savings allowance is for non-ISA savings.
  • badger09
    badger09 Posts: 11,211 Forumite
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    capital0ne wrote: »
    You are not required to declare interest from an ISA nor any capital gains - it's all tax free. The £1,000 savings allowance is for non-ISA savings.

    colsten is well aware of the rules concerning the tax free status of interest & Capital Gains inside an ISA

    If you read the thread from the beginning you will see that her post was correct, in the context of Al Rayan having wrongly notified HMRC in relation to some ISA accounts.
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