Declaring Tax on Savings
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YorkshireTraveller
Posts: 345 Forumite
in Cutting tax
[FONT="]Since the introduction of the £1000 tax free savings allowance any interest that I've received on my accounts has had no tax deducted at source. I know that I now need to report this interest to HMRC and pay the appropriate tax. I was sort of expecting to receive a reminder from HMRC to do this (for the 2016-17 tax year) but I guess this is not the case, so I'm going to give HMRC a call next week.
I have a spreadsheet of all my interest payments received, and will report the amount due accurately. However, as that the banks no longer report the interest paid to HMRC (or do they?) how will HMRC know that the interest that I am declaring is correct?
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I have a spreadsheet of all my interest payments received, and will report the amount due accurately. However, as that the banks no longer report the interest paid to HMRC (or do they?) how will HMRC know that the interest that I am declaring is correct?
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Comments
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the UK tax system works on the basis that everyone is honest and follows the self assessment process to the letterYorkshire_Traveller wrote: »However, as that the banks no longer report the interest paid to HMRC (or do they?) how will HMRC know that the interest that I am declaring is correct?
that is why, if you are selected for a random check, the book will be thrown at you if you are found to have made false declarations when HMRC do take the time to match your figures against independent sources
it is rather like HMRC staking its all on the favourite for the Grand National, sometimes it wins and they celebrate in a blaze of publicity and fines0 -
http://www.taxvol.org.uk/download/HMRCs-guide-to-the-Personal-Savings-Allowance.pdf
One assumes that there was no communication last autumn........
Every taxpayer already has access to their own secure digital
tax account, like an online bank account, that enables them
to interact with us digitally. More services are being added
each month, and we’re introducing simpler ways for people
to pay any tax they owe, removing the need for millions of
people to complete a tax return.
Taxpayers can already see an overview of their taxes through
their digital tax accounts, enabling them to check that their
details are complete and correct, and to report changes.
Have you accessed your personal tax account?
https://www.gov.uk/personal-tax-account0 -
xylophone:
Many thanks for this really helpful. I didn't receive any comunications from HMRC last Autumn.
I have accessed my Personal Tax Account as I have a Government Gateway ID from when I used to do my Self Assesments before I retired 10 years ago.
I am given the option to make a payment - but how will they know what this is for? Do I need to follow up with a phone call to explain?0 -
Until you tell HMRC your interest and they send you a calculation/bill what would you actually be paying?0
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Dazed_and_confused wrote: »Until you tell HMRC your interest and they send you a calculation/bill what would you actually be paying?
I would pay tax at 20% on total interest received less £1000 savings allowance.0 -
https://www.gov.uk/government/publications/personal-savings-allowance-factsheet/personal-savings-allowance
You don’t need to do anything to claim your Personal Savings Allowance.
If you’re a basic rate taxpayer and have savings income or interest of more than £1,000 (£500 for higher rate taxpayers), you’ll have to pay some tax on this. But you don’t need to do anything yet.
HMRC will normally collect the tax by changing your tax code. Banks and building societies will give HMRC the information they need to do this.
If you fill in a Self Assessment tax return you should carry on doing this as normal.
The above (like the previous link) is dated last year.
See also
https://www.moneysavingexpert.com/savings/personal-savings-allowance
How will I pay savings tax if I owe it?
HM Revenue & Customs has confirmed that any tax owing will be paid through changes to your tax code. So you'll get a lower personal allowance for income tax to pay any tax due on savings interest. Those who self-assess will continue to pay through that system (though a new digital system is replacing the annual tax return).
Your bank or building society will pay all savings interest due to you gross (without tax taken off the amount).
When will my tax code change?
Piles of coins with tax lettering on topHMRC has now finished sending out 2017/18 tax codes. Some will have seen their tax code is lower than the standard 1150L, as HMRC already expects they will earn more in savings interest than their personal savings allowance covers.
If this has happened to you, and you won't earn more than £1,000 in savings interest (£500 for higher-rate taxpayers), contact HMRC as they will need to adjust your 2017/18 tax code to be correct. You can call it on 0300 200 3300 or use its 2017/18 tax-code query form.
You have checked your personal tax account and it would appear that no adjustments have been made.
You might wish to telephone HMRC - try shortly before 8am.0 -
Thanks xylophone - will give HMRC a call tomorrow. Think I'd rather pay the tax due rather than have my tax code adjusted.0
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I would pay tax at 20% on total interest received less £1000 savings allowance.
It isn't always that simple, for some there will be additional tax to pay even when within the 0% tax rate.
This is because it isn't an "allowance". So for example there are a few situations where income within the "allowance" gives rise to an effective tax rate of 10%. And income over the allowance can give an effective tax rate of more than 20%.
May well not affect you but it will for plenty of people.
And some lower earners may not even be able to benefit from the £1,000 PSA rate because they get the other 0% tax rate although that doesn't cost more in tax :-)0 -
Dazed_and_confused wrote: »I would pay tax at 20% on total interest received less £1000 savings allowance.
It isn't always that simple, for some there will be additional tax to pay even when within the 0% tax rate.
This is because it isn't an "allowance". So for example there are a few situations where income within the "allowance" gives rise to an effective tax rate of 10%. And income over the allowance can give an effective tax rate of more than 20%.
May well not affect you but it will for plenty of people.
And some lower earners may not even be able to benefit from the £1,000 PSA rate because they get the other 0% tax rate although that doesn't cost more in tax :-)
I agree for others it may not be straighforward, but for me it is!0 -
Well I phoned HMRC this morning - charming helpful lady. We had a good discussion on how the new system just isn't working and that other callers had said the same! (Why not let the banks continue to deduct interest and then reclaim the tax paid on the £1000, or have a mini on-line self assesment form purely for declaring savings interest?).
I had the option to pay the tax owing by having my tax code adjusted for the current tax year or pay in a lump sum.
All sorted thanks to everyone for their help and advice.0
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