Rising interest rates, income and income tax
Discussion
With interest rates rising I will perhaps exceed the £1k (?) tax allowance on interest.
I have previously done a self assessment for tax but tax man has written to say I dont need to do one moving forwards.
My brother sent me this info (source unknown) - does anyone know if this is the case ?
"You can’t trick the taxman
If you bust your Personal Allowance, HMRC will know.
Banks, building societies and National Savings & Investments report how much interest they have paid you in the tax year to April.
This information filters through to HMRC during the summer months. It then adjusts your tax code in order to take any tax that you may owe. The amount you have earned above your allowance will show up here.
You don’t need to tell HMRC how much interest you have earned unless you fill in a self-assessment form.
But you can tell the taxman your estimates if you think the code is likely to be wrong. For example, you may have had a lot more in savings two years ago than you do now."
Can anyone confirm or otherwise - id rather not do a tax return as just hastle
Many thanks
I have previously done a self assessment for tax but tax man has written to say I dont need to do one moving forwards.
My brother sent me this info (source unknown) - does anyone know if this is the case ?
"You can’t trick the taxman
If you bust your Personal Allowance, HMRC will know.
Banks, building societies and National Savings & Investments report how much interest they have paid you in the tax year to April.
This information filters through to HMRC during the summer months. It then adjusts your tax code in order to take any tax that you may owe. The amount you have earned above your allowance will show up here.
You don’t need to tell HMRC how much interest you have earned unless you fill in a self-assessment form.
But you can tell the taxman your estimates if you think the code is likely to be wrong. For example, you may have had a lot more in savings two years ago than you do now."
Can anyone confirm or otherwise - id rather not do a tax return as just hastle
Many thanks
HMRC wants to get rid of Self Assessment - eventually.
At the moment, if you have to declare taxable income that HMRC would not otherwise be aware of then the normal procedure would be to register for Self Assessment.
However, if this income is relatively minor and simple, such as interest just exceeding £1,000 or dividends exceeding £2,000, then HMRC will accept a phone call to them to let them know about it and, if you are already paying tax under the PAYE system, they will collect the additional tax by adjusting your PAYE Tax Code.
At the moment, if you have to declare taxable income that HMRC would not otherwise be aware of then the normal procedure would be to register for Self Assessment.
However, if this income is relatively minor and simple, such as interest just exceeding £1,000 or dividends exceeding £2,000, then HMRC will accept a phone call to them to let them know about it and, if you are already paying tax under the PAYE system, they will collect the additional tax by adjusting your PAYE Tax Code.
any one shed any light on this aspect ?
Banks, building societies and National Savings & Investments report how much interest they have paid you in the tax year to April.
This information filters through to HMRC during the summer months. It then adjusts your tax code in order to take any tax that you may owe. The amount you have earned above your allowance will show up here.
You don’t need to tell HMRC how much interest you have earned unless you fill in a self-assessment form.
Banks, building societies and National Savings & Investments report how much interest they have paid you in the tax year to April.
This information filters through to HMRC during the summer months. It then adjusts your tax code in order to take any tax that you may owe. The amount you have earned above your allowance will show up here.
You don’t need to tell HMRC how much interest you have earned unless you fill in a self-assessment form.
semisane said:
any one shed any light on this aspect ?
Banks, building societies and National Savings & Investments report how much interest they have paid you in the tax year to April.
This information filters through to HMRC during the summer months. It then adjusts your tax code in order to take any tax that you may owe. The amount you have earned above your allowance will show up here.
You don’t need to tell HMRC how much interest you have earned unless you fill in a self-assessment form.
You can risk allowing HMRC to update your PAYE coding correctly. If they get it wrong (as they often do) and you pay the wrong tax as a result, they will blame YOU for not telling them they were wrong.Banks, building societies and National Savings & Investments report how much interest they have paid you in the tax year to April.
This information filters through to HMRC during the summer months. It then adjusts your tax code in order to take any tax that you may owe. The amount you have earned above your allowance will show up here.
You don’t need to tell HMRC how much interest you have earned unless you fill in a self-assessment form.
It's up to you to decide if you are happy with this uncertainty.
I'm quite sure EricMc answered this, but as an aside - the fear of HMRC on relatively minor transgressions or amounts seems quite high. I've always found them to be reasonable to deal with, be it tax code changes, the odd fine for late self assessment or even rebates. As long as you are patient to get through the telephone wait, for personal tax they always seem reasonable. I guess as complexity and amount increases - so does the expectation that amounts are correctly reported (get an accountant).
I don't think for people on PAYE with minor under/ over payments they are looking to slap an evasion case on.
I don't think for people on PAYE with minor under/ over payments they are looking to slap an evasion case on.
mark seeker said:
Does anyone know / remember why banks or building societies stopped taking the interest at source? My guess is that all interest used to be taxed and then UK Gov introduced these tax free allowances?
You've answered the question yourself.An individual can have up to £1,000 interest income in a given tax year before tax is payable on the interest. When this was introduced, this allowed the banks to stop automatically deducting the 20% tax at source as they had done for decades.
So, as long has an individual's total interest income from all sources is lower than £1,000, they will not have to pay any tax on that interest. If they already submit a self assessment tax return, they should still show the interest in the appropriate section of the return, but they won't pay any tax on it.
The problems begin when interest exceeds £1,000. Now tax WILL be payable on the interest that exceeds £1,000. If the individual already submits tax returns, then the self assessment system will automatically calculate the tax liability arising on the interest. However, if the individual does not submit tax returns, he/she may find that they need to register for Self Assessment just to ensure they pay the right tax on the interest.
With interest rates beginning to rise again, this may be something that becomes more common.
The £1k allowance becomes £500 if you're in the higher rate.
I'm needing to work this out now and it's a PITA for such a small sum, especially when it was hard enough getting 1% in a notice account in the first place. Almost wish I hadn't bothered sheltering my house deposit in savings accounts.
I'm needing to work this out now and it's a PITA for such a small sum, especially when it was hard enough getting 1% in a notice account in the first place. Almost wish I hadn't bothered sheltering my house deposit in savings accounts.
Sheepshanks said:
OP is coming across as a bit rude, especially bearing in mind there’s no clear question.
His posts have twice stated the correct position: It’s automatic - you don’t need to do anything.
Apologies, not sure I was being rude though !!His posts have twice stated the correct position: It’s automatic - you don’t need to do anything.
I have stated a position quoted from my brother, and I am asking if this is the correct.
Below was the question I posed from my original post in relation to whether banks / building societies send interest info to the tax man
Can anyone confirm or otherwise - id rather not do a tax return as just hastle
Lack of comprehension ?
Anyway the question has been clarified thank you so no need to turn into a bun fight !
I struggle to believe that financial institutions are *systematically* sending details of interest through to HMRC.
We’re just not that sophisticated as a country at this point IMO.
How would they cope with joint accounts? Arbitrarily pro-rate the interest between the various holders??
Would they use the cash or accruals basis for accounting etc???
I accept that, there are some provisions under the Automatic Exchange of Information (AEOI) regs. for pertinent information to be shared across borders, but I am not so sure that this is applied domestically - but I have no first hand experience.
What I do believe is that HMRC would have *the ability* to collect info. from left, right, and centre if they set their minds to it, but we are probably some way off that being systematically applied to the average taxpayerbloke.
We’re just not that sophisticated as a country at this point IMO.
How would they cope with joint accounts? Arbitrarily pro-rate the interest between the various holders??
Would they use the cash or accruals basis for accounting etc???
I accept that, there are some provisions under the Automatic Exchange of Information (AEOI) regs. for pertinent information to be shared across borders, but I am not so sure that this is applied domestically - but I have no first hand experience.
What I do believe is that HMRC would have *the ability* to collect info. from left, right, and centre if they set their minds to it, but we are probably some way off that being systematically applied to the average taxpayerbloke.
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