Savings interest, CGT allowances, dividend allowances...
Discussion
I complete a self assessment return each year as I have income from rental property in additional to my PAYE full time job, however it occurred to me that starting in April more and more people will have to declare earnings from the following.
- Interest on savings outside of an ISA above either £500 or £1000 depending on their income tax bracket.
- Any capital gains tax that exceeds £3,000.
- Any dividend payments that exceed £500.
The lowering of these payment thresholds will mean more and more people will be due to pay additional tax. Is it likely that many people will simply be unaware of these changes and if so how do HMRC manage this? What visibility to HMRC have of peoples bank accounts and income from various sources.
Not an issue for me personally as I declare everything through my self assessment but there will be many people who have never had to submit a self assessment return before.
- Interest on savings outside of an ISA above either £500 or £1000 depending on their income tax bracket.
- Any capital gains tax that exceeds £3,000.
- Any dividend payments that exceed £500.
The lowering of these payment thresholds will mean more and more people will be due to pay additional tax. Is it likely that many people will simply be unaware of these changes and if so how do HMRC manage this? What visibility to HMRC have of peoples bank accounts and income from various sources.
Not an issue for me personally as I declare everything through my self assessment but there will be many people who have never had to submit a self assessment return before.
Interest on savings is going to be the biggest one. There must be thousands of well past their sell by date old ladies and gentlemen who have deposit accounts that will suddenly be paying more than £1k in interest.
Firstly they wont realise they have to do it and secondly probably could not even if they wanted to.
Firstly they wont realise they have to do it and secondly probably could not even if they wanted to.
I'm going to be in this situation, the banks/building societies etc, are supposed to send end of year amounts to HMRC, come September time I should get a letter from HMRC telling me how much I owe.
Happened last year, I sent them the relevant amount, or failing that they will adjust the tax code.
They have less staff now and a lot more people will be dragged into this situation this year, I'm sure there will be mistakes, hopefully not for me.
Happened last year, I sent them the relevant amount, or failing that they will adjust the tax code.
They have less staff now and a lot more people will be dragged into this situation this year, I'm sure there will be mistakes, hopefully not for me.
Dixy said:
Interest on savings is going to be the biggest one. There must be thousands of well past their sell by date old ladies and gentlemen who have deposit accounts that will suddenly be paying more than £1k in interest.
Firstly they wont realise they have to do it and secondly probably could not even if they wanted to.
https://www.gov.uk/apply-tax-free-interest-on-savingsFirstly they wont realise they have to do it and secondly probably could not even if they wanted to.
Probably most of them will have a larger allowance.
There’s also £0 savings allowance for 45% tax rate.
I take great pleasure in having got now quite a bit of money invested without a single bit of it attracting tax - for now.
Rufus Stone said:
Ecosseven said:
Not an issue for me personally as I declare everything through my self assessment but there will be many people who have never had to submit a self assessment return before.
But think of all the £100 fines HMRC will now issue. Nice little earner.Ecosseven said:
I complete a self assessment return each year as I have income from rental property in additional to my PAYE full time job, however it occurred to me that starting in April more and more people will have to declare earnings from the following.
- Interest on savings outside of an ISA above either £500 or £1000 depending on their income tax bracket.
- Any capital gains tax that exceeds £3,000.
- Any dividend payments that exceed £500.
The lowering of these payment thresholds will mean more and more people will be due to pay additional tax. Is it likely that many people will simply be unaware of these changes and if so how do HMRC manage this? What visibility to HMRC have of peoples bank accounts and income from various sources.
Not an issue for me personally as I declare everything through my self assessment but there will be many people who have never had to submit a self assessment return before.
Where have you been for the past 6 months or more? - Interest on savings outside of an ISA above either £500 or £1000 depending on their income tax bracket.
- Any capital gains tax that exceeds £3,000.
- Any dividend payments that exceed £500.
The lowering of these payment thresholds will mean more and more people will be due to pay additional tax. Is it likely that many people will simply be unaware of these changes and if so how do HMRC manage this? What visibility to HMRC have of peoples bank accounts and income from various sources.
Not an issue for me personally as I declare everything through my self assessment but there will be many people who have never had to submit a self assessment return before.
The media has been in overdrive on exactly all the points that you have made...eg "millions of pensions to pay take and complete SA for the first time from April 2024" has been an almost daily typical headline.
Millions are unaware of this new responsibility. One major issue is the way the tax system works, the money will be spent before the tax bill arrives, which will cause even more headlines when this hits the fan sometime in the forthcoming tax year.
Any organisation paying a potentially taxable amount, eg a building society paying interest on a FRB, has had a requirement to report this and the recipient's details to HMRC, so there's nothing new. The problem is that many people currently under the frozen tax thresholds will see their pensions, investment savings increase, so will fall into taxation for the first time, mostly unknowingly.
And remember.... there's only one party responsible for income tax affairs: you. Nobody you can blame for not knowing what's about to happen.
R.
Yes - us accountants have been aware of this for a couple of years now. Some people were affected by this for tax year 2022/23 as interest rates started to climb from about mid way through that tax year.
Before the Interest Threshold of £1,000 was introduced, ALL bank interest received (apart from interest on ISAs) was taxable at the basic rate of tax. However, most taxpayers didn't need to do anything because the banks and building societies automatically deducted the 20% tax at source. The only people who had to worry about declaring the interest on a Self Assessment tax return were higher rate taxpayers as they needed to pay additional tax on the interest.
Once the £1,000/£500 threshold was introduced, banks and building societies stopped calculating and deducting the 20% tax at source.
As has been said, with frozen allowances and tax bands, and general income rising, a LOT more people are going to find themselves caught out by the changing situation.
It's going to be the High Income Child Benefit tax charge debacle all over again.
Before the Interest Threshold of £1,000 was introduced, ALL bank interest received (apart from interest on ISAs) was taxable at the basic rate of tax. However, most taxpayers didn't need to do anything because the banks and building societies automatically deducted the 20% tax at source. The only people who had to worry about declaring the interest on a Self Assessment tax return were higher rate taxpayers as they needed to pay additional tax on the interest.
Once the £1,000/£500 threshold was introduced, banks and building societies stopped calculating and deducting the 20% tax at source.
As has been said, with frozen allowances and tax bands, and general income rising, a LOT more people are going to find themselves caught out by the changing situation.
It's going to be the High Income Child Benefit tax charge debacle all over again.
GiantEnemyCrab said:
Another in this boat, struggling to calculate CGT gains in GIA via Interactive Investor. Feel like a 'generate certificate' button would be useful!
In your ii GIA section, it will clearly show the gain on any holdings you have. It will show the average purchase price v's the current price.Therefore, CGT is relatively easy to calculate before you dispose of all, or a portion of the holding.
ii will issue a consolidated tax certificate in May, highlighting what interest and dividend income you have received in the previous tax year.
I genuinely believe the Government and HMRC simply don't care.
CGT has always been a nightmare for them to try to police so generally speaking they don't bother - other than on the property side of things where numbers get significant. Government likes taxes that collect themselves like PAYE, VAT, fuel duty, booze duty etc. Hence property, the big end of CGT, is now immediate "declare and pay" to get the cash in and HMRC can keep an eye on things just by watching the Land Registry and stamp Duty.
Mr & Mrs Miggins slipping a bit of interest or CGT through the system isn't worth the cost of chasing. Wealthier people are likely to trying to keep their affairs in order so doing proper self assessment. They face a much higher risk of significant penalties and/or prosecution if they caught playing games.
CGT has always been a nightmare for them to try to police so generally speaking they don't bother - other than on the property side of things where numbers get significant. Government likes taxes that collect themselves like PAYE, VAT, fuel duty, booze duty etc. Hence property, the big end of CGT, is now immediate "declare and pay" to get the cash in and HMRC can keep an eye on things just by watching the Land Registry and stamp Duty.
Mr & Mrs Miggins slipping a bit of interest or CGT through the system isn't worth the cost of chasing. Wealthier people are likely to trying to keep their affairs in order so doing proper self assessment. They face a much higher risk of significant penalties and/or prosecution if they caught playing games.
I hate Self Assessment tax Returns so much I have probably prevented myself making good financial decisions just to avoid the paperwork. Maybe I only need to put one number into one tiny box but it is the pages and pages of unrelated questions that terrifies me. I am really concerned that my simple affairs will now need Self Assessment.
I am even more concerned that my frail elderly uncle who is registered blind and has Parkinsons Disease and who has never used the Internet will need to complete Self Assessment when previously everything was dealt with at source.
It is a disgusting situation that elderly frail persons or even just people who are have not previously needed to concern themselves are now caught by the Self Assessment net.
I am even more concerned that my frail elderly uncle who is registered blind and has Parkinsons Disease and who has never used the Internet will need to complete Self Assessment when previously everything was dealt with at source.
It is a disgusting situation that elderly frail persons or even just people who are have not previously needed to concern themselves are now caught by the Self Assessment net.
The problem is, in order to put something into action, like contacting an accountant, the individual needs to be aware that they need to do something.
Many, many people will simply just not be aware.
At the moment, tax tribunals are overwhelmed with people appealing against tax bills - including interest and penalties - in respect of the High Income Child Benefit Charge. They were caught out simply because they weren't aware that there was something they needed to be doing.
Many, many people will simply just not be aware.
At the moment, tax tribunals are overwhelmed with people appealing against tax bills - including interest and penalties - in respect of the High Income Child Benefit Charge. They were caught out simply because they weren't aware that there was something they needed to be doing.
deanobeano said:
GiantEnemyCrab said:
Another in this boat, struggling to calculate CGT gains in GIA via Interactive Investor. Feel like a 'generate certificate' button would be useful!
In your ii GIA section, it will clearly show the gain on any holdings you have. It will show the average purchase price v's the current price.Therefore, CGT is relatively easy to calculate before you dispose of all, or a portion of the holding.
ii will issue a consolidated tax certificate in May, highlighting what interest and dividend income you have received in the previous tax year.
I do monthly drip feeding so the price is different every month etc.
Dixy said:
Interest on savings is going to be the biggest one. There must be thousands of well past their sell by date old ladies and gentlemen who have deposit accounts that will suddenly be paying more than £1k in interest.
Firstly they wont realise they have to do it and secondly probably could not even if they wanted to.
Don't forget the 'Starting rate for savings' Firstly they wont realise they have to do it and secondly probably could not even if they wanted to.
That may allow up to an additional £5,000 of interest they don't have to pay tax on - 5k if their income is 12,500 reducing (£ for £) to zero if their income is 17,500.
Our cash savings are in Mrs Car bon's name for this reason.
https://www.gov.uk/apply-tax-free-interest-on-savi...
Edited by Car bon on Thursday 28th March 16:47
I got a letter from HMRC summarising earnings from various sources, PAYE, dividends and savings interest. PAYE was obviously reported by my employer, I had called them up before the end of the previous tax year and they adjusted my allowance for the dividend tax and the savings interest must have been automatically reported by the bank.
Allowance automatically adjusted to claim the tax on savings interest over the allowance.
Allowance automatically adjusted to claim the tax on savings interest over the allowance.
Gassing Station | Finance | Top of Page | What's New | My Stuff