Savings Interest Payments Tax Question

[Backdrifter]

My partner and I have a joint NS&I account which contains the proceeds of a property sale. It's generating substantial interest payments into our joint current account. How is the tax on these interest amounts paid?

[Hopkirk]

If you are basic rate taxpayers you can earn £1000 each in interest per year tax free.

[237SJ]

You have to do a self assessment tax return for the amount over your savings tax allowance.

[gingejbee]

No to the self-assessment answer above. NS&I will inform HMRC of your interest and will charge accordingly (through your tax code, normally).

[gingejbee]

...^ and HMRC will charge accordingly!

[Backdrifter]

@gingejbee - Thanks, that suggests I simply wait to be informed by HMRC?

[237SJ]

Savings accounts pay interest gross (used to be net) of tax and it's up to the account holder to notify HMRC if there is tax to be paid. If there is, you can pay online or have your next year's tax code changed to pay it through that.

[Backdrifter]

@237SJ - many thanks, that's helpful.

[ubasses]

If you are employed or receive a pension HMRC will collect the tax when they have been advised by the financial institutions how much interest you have paid. They will then estimate for the next year, and adjust it in yiour tax code.
If your interest is over £10,000 or you are self employed you will need to complete a tax return.
I have never had to complete a tax return.

[237SJ]

ubasses - I thought they no longer did that and it was up to the savings account holder to tell HMRC because interest is paid gross?

[ubasses]

No, it does mean your tax code yoyos, I wonder if they adjust it everytime they get a return from the bank without waiting for any further returns. The next years code is then based on interest earned the previous year etc, and on it goes.

[DocHH]

Some time after the end of the Tax Year NS&I should send you a statement of interest accrued. Interest will have been paid gross of tax, I imagine they will send a similar statement to the Revenue. I believe you will both need to file a Self Assessment form, and that as the account is joint you will be able to split the Interest accrued equally on each form. You wil also need to declare other income from all sources. You will have the option on the form to decide if you wish any tax owed to be paid through the next years tax coding or to pay it as a lump sum, but possibly in two tranches, as is normal for people who need to file Self Assessment forms.. The Revenue will then send each of you a statement of tax paid and any liability.

[237SJ]

^ I do this every year for interest owed (one account of which is NS&I) It's fairly simple when you fill out the form. I have always just paid the tax online rather than having my tax code adjusted because I just like to keep it simple.

[237SJ]

Sorry, *for tax on interest owed*

[Canary42]

I think you should check with HMRC just to be safe.

[Hopkirk]

It must be pretty hefty to give more than £2000 interest (unless Backdrifter or partner are higher rate taxpayers)

[SarraMarines]

Congratulations on your successful property sale and the substantial interest payments it's generating for you and your partner! In terms of taxes, the interest income generated by your joint NS&I account will need to be reported on your tax return and may be subject to income tax.

[SarraMarines]

"Congratulations on your successful property sale and the substantial interest payments it's generating for you and your partner! In terms of taxes, the interest income generated by your joint NS&I account will need to be reported on your tax return and may be subject to income tax.
To ensure that you're accurately reporting your interest income, you may want to consider using a tool like https://www.paystubcreator.net/ to generate professional-looking pay stubs that outline your income and taxes paid. This can help you keep track of your income and ensure that you're meeting your tax obligations."