Personal allowance and interest from bond
Discussion
Hello,
My father has recently retired - basic rate tax payer. His wife is already retired and is below taxble rate.
He has received interest from a 5 year bond (joint account) that is circa £12k. This has been received interest free, straight into his (and wifes) joint bank account.
Looking at the HMRC website, it would appear that he doesn't need to fill in any forms for the interest because HMRC will automatically adjust his tax code on the pension he receives.
Can anybody confirm if this is correct?
Thanks in advance
My father has recently retired - basic rate tax payer. His wife is already retired and is below taxble rate.
He has received interest from a 5 year bond (joint account) that is circa £12k. This has been received interest free, straight into his (and wifes) joint bank account.
Looking at the HMRC website, it would appear that he doesn't need to fill in any forms for the interest because HMRC will automatically adjust his tax code on the pension he receives.
Can anybody confirm if this is correct?
Thanks in advance
The first £1,000 of interest received is now tax free. All interest over that amount is taxed at 20%. If the individual is a higher rate taxpayer, some of that interest will be taxed at 40% (or maybe even 45%).
Up until 5 April 2016, banks and other interest providers automatically dedeucted tax at 20% on interest paid into normal savings/bond accounts.
Since 6 April 2016 they no longer do this.
If a taxpayer has interest that needs to be taxed, they need to notify HMRC that they have taxable interest income. If the person doesn't already submit Self Assessment tax returns, then probably the best way for HMRC to collect teh tax is through an adjustment to the taxpayer's PAYE coding.
This can be messy because HMRC don't always get this right. The taxpayer needs to be on the ball and notify HMRC if their attempts to collect the right tax are being carried out properly.
Up until 5 April 2016, banks and other interest providers automatically dedeucted tax at 20% on interest paid into normal savings/bond accounts.
Since 6 April 2016 they no longer do this.
If a taxpayer has interest that needs to be taxed, they need to notify HMRC that they have taxable interest income. If the person doesn't already submit Self Assessment tax returns, then probably the best way for HMRC to collect teh tax is through an adjustment to the taxpayer's PAYE coding.
This can be messy because HMRC don't always get this right. The taxpayer needs to be on the ball and notify HMRC if their attempts to collect the right tax are being carried out properly.
Gassing Station | Finance | Top of Page | What's New | My Stuff