Donate SIGN UP

Savings Interest Tax Allowance.

Avatar Image
davebro3 | 08:00 Thu 12th Sep 2024 | Personal Finance
26 Answers

I think I earned more interest than the tax free £1000 allowance in 22/23 & 23/24 but have yet to receive any calculation/assessment of tax owed from HMRC.

They say the banks will report the interest to HMRC & no self-assessment tax return is required.

Has anyone here been charged tax on their interest?

Gravatar

Answers

1 to 20 of 26rss feed

1 2 Next Last

Best Answer

No best answer has yet been selected by davebro3. Once a best answer has been selected, it will be shown here.

For more on marking an answer as the "Best Answer", please visit our FAQ.

"They say the banks..."

I'm not sure who you mean by "they" - is that what HMRC have explicitly stated?. My understanding was that HMRC merely use the bank's info to check the Self Asessment return.

Question Author

From HMRC: //You need to register for Self Assessment if your income from savings and investments is over £10,000.//

Been through their questionaire & confirms I don't need to make a return.

Question Author

Lloyds Bank //Banks and other financial institutions report all interest to HM Revenue & Customs (HMRC) at the end of each tax year.//

If you've been through the questionaire and reached that conclusion, then I don't understand your concern.

And yes, I've been charged tax on interest in the past - I've yet to make my 23/24 Self Assessment return.

Question Author

My concern is that I may be building up a substantial tax bill due to HMRC laxity.

hi dave bro.  My mum is in the same position, she got something like £1003.87 interest and is now completely panicking over having to pay tax and how she tells them (my dad used to sort this stuff out but he died last year)  i cant advise her because i will never have enough money to get 1k in interest :)

As I understand it you are concerned because you know you have to pay tax if your interest is over £1k in a financial year (assuming you already pay tax on income).  

You have received more than £1k interest but the website states you only need to self assess if you exceed £10k interest in a year.

Have I got that right?  You know you should be paying tax but don't need to self-assess so you are worried about how the tax will be collected.

Yes, I do understand that, from experience. One year they refunded me about £5,000 after I submitted my return, then a few days later sent me a demand for exactly the same amount. I'm not sure how to prevent that sort of occurrence without hiring an expensive accountant.

Question Author

Spot on barry. I assume when it is eventually charged I will pay via a PAYE coding adjustment. I would have though 22/23 should have been dealt with by now - my estimation (various accounts) is that I was only marginally over the £1000 that year.

Question Author

The situation seems ambiguous - I also found this:

//Your bank or building society will tell us how much interest you get at the end of the year if you:

do not complete a Self Assessment tax return

do not get a pension

are not employed

We’ll tell you if you need to pay tax and how to pay it.//

 

The 23/24 ones are still being worked on. They usually aim to work it all out by October (end of October in my experience) so maybe check up in a month from now.

The 22/23 one should have been done. My guess is that they don't alway bother chasing it up if the amount involved is small- so if you were only say £25 over. Mine was  £1010 and they DID pick up on it in 2022/23 because I was a higher rate taxpayer (total income was just over the higher threshold by a few when interest was included) so my savings allowance was reduced to £500 and I was asked for £204 (£40% of £510)-ouch!

Sometimes they ask for a one-off payment, sometimes they adjust your code for next year, and sometimes they let you choose.

Question Author

thx NMA - maybe they've let me off for 22/23 🤞

Question Author

It's ironic really - I worked in the Inland Revenue many moons ago (of course it's vastly different now). Some of my old friends still call me "Taxman Dave" and assume I can help with any tax matters when in fact I can't.

Yes, my wife was just over and it wasn't picked up.

My guess is that if the interest i s spread over several insitutions they might not pick it all up, and also if the amount of tax due is small- say 20% of £30 they won't bother for £6, just as they have said they are not going to start claiming tax (yet) from pensioners who are only marginally above the £12570 allowance this year.

Low earners are allowed up to £5000 extra savings interest. If you earn less than £12570 you get the full £6000 allowance. Each £1 you earn more than the basic tax allowance reduces the amount of extra tax free interest you can get until you earn £18750.

Sorry  - £18570

Yes indeed, it's not very well known, and I think it's something that could be removed. I never understood how anyone earning less than £18750 could get £5000 of interest pa as that would mean having savings of over £100,000 (and that's on top of ISA savings). I never understand why chancellors fiddle around with little things like that. 

Basically, if your income from earnings and/or interest is not above £18,570 a year, there's no tax to pay.

Not so - if your earnings from employment and pensions is less than £12570 you will pay tax on savings income over £6000

1 to 20 of 26rss feed

1 2 Next Last

Do you know the answer?

Savings Interest Tax Allowance.

Answer Question >>