savings interest on a joint account
Discussion
I've never paid tax on my savings interest but it looks like I will become liable this year. How is it taken? Do they adjust your taxcode or what?
It's a combo of current account interest, savings account and a one year fixed term..
The current account and fix are both joint accounts so will I only be liable for half of the interest?
I'm just on paye never done a tax return do I need to?
It's a combo of current account interest, savings account and a one year fixed term..
The current account and fix are both joint accounts so will I only be liable for half of the interest?
I'm just on paye never done a tax return do I need to?
Interest on savings is paid gross, so there's no tax deducted before payment.
For any saving held jointly the interest needs to be spilt between the account holders.
Both account holders are liable for the tax on the interest. As it is not deducted from source (and neither through PAYE) you will need to report the interest to HMRC via their self assessment system, which means completing a form, all doable online. It is reasonably straightforward, and greatly helped by retaining all relevant statements of interest. Better still, keep a spreadsheet showing all the interest for each account, keep it up to date, and then simply add the totals into the SA form when you are ready. After sending the SA form to HMRC they will calculate and tell you the tax due.
With the substantial reduction in tax allowances for savings and dividends etc starting in the tax year 2023/4, there's going to be 1000s of people in your situation, ie required to do SA for the first time.
Before doing anything however, check to see if your total interest from all sources for the tax year 2023/4 is les than the new, lower allowance for 2023/4. If it is then there's no tax on your savings to pay, and no need to complete the SA form. You will need to do this check each subsequent tax year.
R.
For any saving held jointly the interest needs to be spilt between the account holders.
Both account holders are liable for the tax on the interest. As it is not deducted from source (and neither through PAYE) you will need to report the interest to HMRC via their self assessment system, which means completing a form, all doable online. It is reasonably straightforward, and greatly helped by retaining all relevant statements of interest. Better still, keep a spreadsheet showing all the interest for each account, keep it up to date, and then simply add the totals into the SA form when you are ready. After sending the SA form to HMRC they will calculate and tell you the tax due.
With the substantial reduction in tax allowances for savings and dividends etc starting in the tax year 2023/4, there's going to be 1000s of people in your situation, ie required to do SA for the first time.
Before doing anything however, check to see if your total interest from all sources for the tax year 2023/4 is les than the new, lower allowance for 2023/4. If it is then there's no tax on your savings to pay, and no need to complete the SA form. You will need to do this check each subsequent tax year.
R.
The move from net to gross was fine for people who already did SAs, and the ever-penniless coffers of State got all the money due. Now that the burden of tax payment has been passed to the saver, many of whom are not on SA, I wonder how much cash the State will lose out on, either by people not knowing or not bothering to do an SA.
Simpo Two said:
The move from net to gross was fine for people who already did SAs, and the ever-penniless coffers of State got all the money due. Now that the burden of tax payment has been passed to the saver, many of whom are not on SA, I wonder how much cash the State will lose out on, either by people not knowing or not bothering to do an SA.
And how many 1000s of people will get an unexpected fine from HMRC for not submitting their 2023/4 SA on time, and the consequential late payment of any tax due, I wonder?R.
According to https://www.gov.uk/apply-tax-free-interest-on-savi... you only need to register for Self assessment if you earn over £10,000 income in interest from savings, and investments.
Noise Allowed said:
According to https://www.gov.uk/apply-tax-free-interest-on-savi... you only need to register for Self assessment if you earn over £10,000 income in interest from savings, and investments.
That states it's for 2022/23, so out of date. Allowances have reduced 2023/4.R.
The Leaper said:
Interest on savings is paid gross, so there's no tax deducted before payment.
For any saving held jointly the interest needs to be spilt between the account holders.
Both account holders are liable for the tax on the interest. As it is not deducted from source (and neither through PAYE) you will need to report the interest to HMRC.....
TBH I thought joint account interest wasn't reported to HMRC but the page linked to https://www.gov.uk/apply-tax-free-interest-on-savi... suggests it is and will be split 50/50 unless you say otherwise.For any saving held jointly the interest needs to be spilt between the account holders.
Both account holders are liable for the tax on the interest. As it is not deducted from source (and neither through PAYE) you will need to report the interest to HMRC.....
OP: That's possibly crucial if your missus isn't a tax payer, or is lower rate and you're higher.- you can declare that the money (the underlying funds on which interest is paid) is all or mostly hers
Edited by Sheepshanks on Tuesday 27th June 08:48
If you are PAYE and don’t fill in a SA normally then you will repay any tax via a tax code change, the interest payments you have received in the tax year are reported to HMRC via your banks/Buidljng society etc so you don’t need to do anything in this scenario.
https://community.hmrc.gov.uk/customerforums/pt/f5...
https://community.hmrc.gov.uk/customerforums/pt/f5...
duckson said:
If you are PAYE and don’t fill in a SA normally then you will repay any tax via a tax code change, the interest payments you have received in the tax year are reported to HMRC via your banks/Buidljng society etc so you don’t need to do anything in this scenario.
https://community.hmrc.gov.uk/customerforums/pt/f5...
Except in that scenario you are assuming HMRC will pick up the interest information automatically and correctly and then adjust your tax coding automatically and correctly. Sadly, that is very often not the case with HMRC.https://community.hmrc.gov.uk/customerforums/pt/f5...
AND, if HMRC fails to pick up on the situation, they will blame the taxpayer for not alerting them to the fact that tax was due on the interest and you may get fined.
As interest rates start to (slowly) clime, more and more people are going to discover that they need to pay tax on their interest income.
Also, be aware that the £1,000 threshold covers ALL of your interest income from all sources (ignoring ISAs). So if you have interest from three accounts of say £300, £500 and £400 (i.e. £1,200 in total), you will need to pay tax on the £200 excess.
Imasurv said:
How does the interest work on a joint account if one account holder is a standard rate and one is a higher rate tax payer? Is it all taxed at higher rate or split? So you both put the full interest received in your tax return?
Interest is paid gross and split according to how the account is itself split - usually 50/50. In the past you could declare split as being say 90/10 but not sure if you can still do that.
Imasurv said:
How does the interest work on a joint account if one account holder is a standard rate and one is a higher rate tax payer? Is it all taxed at higher rate or split? So you both put the full interest received in your tax return?
Assuming 50/50 split, interest will need to recorded in the same ratio between the joint account holders. Then, each account holder reports their share of the interest and is taxed as per their own circumstances. In your case, one will be taxed at standard rate and the other as a higher rate tax payer, on their share of the interest. Simples!R.
The obligation to file a SA tax return is going to catch more and more people out and given the nature of the beast, I’m not sure that it is a surprise that the HMRC website itself cannot succinctly give out personal ‘advice’ to every individual who consults it.
This may become more possible in time with developments in AI/LLMs etc.
For the time being, it is interesting to note that HMRC tell you that you have to file an SA return if your (non-ISA) ‘Savings Interest’ is above £10,000 (which sounds like a lot given that £10k would be earned on £250k @ 4%pa).
However, quite clearly, if you have taxable savings interest above your allowance which could be £0/£500/£1,000 then the obligation is on you to pay whatever income tax is due one this income.
The nuance is that if you have taxable savings interest of £9k, you may not be ‘required to /expected to’ file an SA return specifically to declare this as there could be an another way for you to deal with it (i.e., over the phone).
Of course, it is possible to have ‘taxable’ savings interest of £9k and yet have no income tax to pay, because you are within another allowance and/or subject to the 0% rate, but the point remains that HMRC place the obligation on the individual to navigate the tax code and they have the right to impose penalties on those who don’t embrace this.
The whole system is miles away from being efficient and we can only hope that they will get there in the end but I suspect it could take a generation to accomplish any meaningful change…
In the meantime, we can expect more and more people will be caught out given that interest rates are rising (and allowances are fixed in nominal terms or in the case of the Dividend and CGT allowances, reducing).
Meanwhile; the Office of Tax Simplification has closed…
https://www.gov.uk/government/organisations/office...
This may become more possible in time with developments in AI/LLMs etc.
For the time being, it is interesting to note that HMRC tell you that you have to file an SA return if your (non-ISA) ‘Savings Interest’ is above £10,000 (which sounds like a lot given that £10k would be earned on £250k @ 4%pa).
However, quite clearly, if you have taxable savings interest above your allowance which could be £0/£500/£1,000 then the obligation is on you to pay whatever income tax is due one this income.
The nuance is that if you have taxable savings interest of £9k, you may not be ‘required to /expected to’ file an SA return specifically to declare this as there could be an another way for you to deal with it (i.e., over the phone).
Of course, it is possible to have ‘taxable’ savings interest of £9k and yet have no income tax to pay, because you are within another allowance and/or subject to the 0% rate, but the point remains that HMRC place the obligation on the individual to navigate the tax code and they have the right to impose penalties on those who don’t embrace this.
The whole system is miles away from being efficient and we can only hope that they will get there in the end but I suspect it could take a generation to accomplish any meaningful change…
In the meantime, we can expect more and more people will be caught out given that interest rates are rising (and allowances are fixed in nominal terms or in the case of the Dividend and CGT allowances, reducing).
Meanwhile; the Office of Tax Simplification has closed…
https://www.gov.uk/government/organisations/office...
- needsimprovement
Mr Whippy said:
You have £20k a year ISA allowance.
This shouldn’t be an issue.
If you have that much money to fill an ISA and then generate £££ exposed to interest, the SA shouldn’t be an issue.
It takes only £20,000 outside an ISA to generate £1000 interest at 5%pa, easily doable at today's rates. Many people are going to get "caught" for tax on savings by the rise in interest rates and the reduction in allowances. This shouldn’t be an issue.
If you have that much money to fill an ISA and then generate £££ exposed to interest, the SA shouldn’t be an issue.
I see that the other day the media reported that HMRC fined 180,000 people in the last year for not paying the their right tax amount, half of which were supposedly lower paid. The point is that it is not HMRC that is responsible for ensuring you pay the correct tax, it's your responsibility. If you don't do so, you're exposed to being fined by HMRC.
R.
My assumption is that the majority of those 184,000 penalised would be the self employed / side hustlers who don’t make a lot but did not embrace (!) Self Assessment because they felt they were too small a fish for HMRC to fry…
Many would have had a £nil liability, but anyone earning over £1k pa outside of PAYE should be aware that there are rules and bear traps (for those who get caught trying to game the system).
Many would have had a £nil liability, but anyone earning over £1k pa outside of PAYE should be aware that there are rules and bear traps (for those who get caught trying to game the system).
The Leaper said:
I see that the other day the media reported that HMRC fined 180,000 people in the last year for not paying the their right tax amount
And yet when HMRC get it wrong, I don't suppose they get fined..? Or provide compensation? 
I need to dig into self assessment, not just because of this, but also because of child benefit. Does anyone know the timelines for filing a SA - presumably you have to wait till the end of the FY to file for that FY..?
The Leaper said:
Imasurv said:
How does the interest work on a joint account if one account holder is a standard rate and one is a higher rate tax payer? Is it all taxed at higher rate or split? So you both put the full interest received in your tax return?
Assuming 50/50 split, interest will need to recorded in the same ratio between the joint account holders. Then, each account holder reports their share of the interest and is taxed as per their own circumstances. In your case, one will be taxed at standard rate and the other as a higher rate tax payer, on their share of the interest. Simples!R.
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