Tax on foreign savings query - can anyone help?

[blueovercream]

I lived in New Zealand a few years ago and still have some savings in a New Zealand bank account. The interest I earn on this money is automatically taxed monthly in New Zealand when it comes into my account, in NZ Dollars.

Two questions, definitive answers to which I am struggling to find on HMRCs website:

- Is there a threshold over which I am required to pay UK tax on this interest while the money is still in NZ?
- If I move the money to my UK account, will I be eligible to pay further tax in GBP on any interest earned?

HMRC mentions a threshold of £2000, under which no UK tax is due but I'm not clear whether this applies if tax has already been paid "at source" in NZD.

Thanks for any help!

[Eric Mc]

The general rule is that NO interest under £1,000 is taxable. It doesn't matter where the interest is generated.
So, if you had (say) -

£200.00 interest from a UK bank account and (say) £300.00 interest from a NZ bank account, your total interest is £500.00 and therefore under the £1,000.00 threshold. No UK tax is due.

If your overall interest from all sources exceeds £1,000.00, then you are liable to pay UK tax on the element of interest over £1,000.00. If you have suffered foreign tax at source on the interest before you received it, you will receive a tax credit against any UK tax that might be payable in the UK.

[Kirkmoly]

^ … up to a maximum of the treaty rate which, I believe, is 10% in the case of NZ.

[DaveA8]

I ask this as a general thought, even if it's below the tax threshold, does the holder of a foreign bank account have to complete a self assessment if any interest is earned.
I recall something on the forms alluding to reporting this but clearly I don't know

[Eric Mc]

You need to notify HMRC somehow if you have ANY income that

a) they don't automatically know about

b) you need to pay additional UK tax on

Sine 1995, the standard way to do this has been to register with HMRC so that you can let them know through the Self Assessment system.

HMRC plans to ditch Self Assessment in April 2026 (yes - I'll believe it when I see it) so these days they do allow you to notify them by other means, such as entering information on your "HMRC Tax Acount" or picking up the phone and telling them (good luck with that).

[DaveA8]

Thanks Eric, as always a very helpful and useful reply.

[blueovercream]

Thank you all for the helpful replies so far. To clarify further - I do a self-assessment return each year anyway. The next one might require me to declare the foreign interest as compounding may nudge it above £1000, depending on exchange rates.

Eric, forgive my ignorance but what is a tax credit in this context? Presumably either a payment of the tax back or else a reduction in UK tax due from other sources?

Secondly, how do exchange rates play in here? Currently it's about 0.49 GBP: 1 NZD though it's been up at 0.52 relatively recently. This will obviously influence the amount of tax I'd have to pay, or indeed as I'll be close to the threshold, whether I'd have to pay any at all. Do you use the B of E exchange rate on the day you submit your return and reference this somewhere on the form? Is it more complex than that?

Last question - if I declare and am then taxed on interest while the money is still in NZ, would I be required to pay further tax on interest earned if I moved it into the UK in the same tax year?

[Eric Mc]

You calculate the UK tax on the income and deduct from it any foreign tax already paid. You then pay the balance of any remaining tax to HMRC. If the foreign tax deducted is equal to or exceeds the UK tax, you pay nothing to HMRC.
As a UK tax resident, tax is payable on your worldwide income - whether you remit the income to the UK or not.