tax on savings taxable after 1k is it automatic or self declaration??

[big-all]

Will that count towards this tax year and then starts afresh in April?

its the tax year the interest is paid rather than generated, hence the decision to move to this year to keep it out off next years tax take although moving the savings to an isa means that 5k doesnt count as its tax free but also allows another isa after april to further reduce the taxable amount

as an aside getting interest monthly on fixed savings[locked away] means the first few months interest will be attributed to the year you took the policy out and after april the 5th ish will apply to the next year and iff a 2 or more year will carry on tax year after tax year

 

[cdbe]

Google "starter rate for savings allowance"

 

[Rodders53]

Head over to the MoneySavingExper forums for the details but:

1. at your income and savings interest levels Banks will report interest received to HMRC
2. HMRC will calculate any tax owing and adjust your tax code to take that from your private pension and/or bill you....

3. Most important: https://www.gov.uk/apply-tax-free-interest-on-savings

You can earn up to £18,570* from state and other pension plus savings interest and not pay a penny of tax. Only if you earn more will an ISA be of benefit.

* Or a bit less if you have transferred some Personal Allowance to a partner.

I will need to redo the sums for my non-tax-paying wife as she gets her SP in May, and has some savings income, now the interest rates are higher.

EDIT: I recall vaguely that IF you get interest of >£10k per annum you do have to report that fact to HMRC?? MSE and or HMRC itself will have the facts/details, I'm sure.

 

[big-all]

its probably only a problem next financial year because off last years 6% interest rates if it drops to say 4% my present 22k will gain £880 althought it will be less as 5k in an isa so assuming it drops to 4% in the next year or so with a average 3-4k gained a year through interest and savings from pension will take perhaps 3 years by which time interest may be 2 or 3% so never earn enough interest to worry about

 

[Koolpc]

My work mate told me the other day that he earned approx £4k interest on his savings last month. He earns approx £12k a year at work. He was asking a few of us at work if he will get taxed on his savings interest?

I got no idea myself so told him to contact HMRC.

What do you think?

 

[big-all]

earning 4k assuming 5% is 80k saving are you sure thats correct ??

was any in an isa wrapper[tax free]

i would get thing clarified before contacting hmc

 

[Koolpc]

earning 4k assuming 5% is 80k saving are you sure thats correct ??

was any in an isa wrapper[tax free]

i would get thing clarified before contacting hmc

I dont know much. I believe he said he had over 110k. I know it wasnt an ISA.

 

[big-all]

maybe its tax deducted ??
5% on 110k is 5500 so 4400 after tax
to earn 12k has to be more than one years worth or around 300k

 

[big-all]

Another thought
is the interest actually being realized[paid out] or is it just a paper exercise saying its been added to the total so not yet taxable as not available??

 

[Murdochcat]

Another thought
is the interest actually being realized[paid out] or is it just a paper exercise saying its been added to the total so not yet taxable as not available??

The point at which you receive the interest is when it’s included against your total.

 

[big-all]

The point at which you receive the interest is when it’s included against your total.

yes thats the point i was making it may not be due yet but the worst possible option iff thats the case as you loose your yearly £1000 allowance and added together can reach a higher tax band when added to your income

 

[Murdochcat]

yes thats the point i was making it may not be due yet but the worst possible option iff thats the case as you loose your yearly £1000 allowance and added together can reach a higher tax band when added to your income

IIRC the £1000 limit is for 20% tax payers, and £500 for 40% tax payers

 

[Mottie]

yes thats the point i was making it may not be due yet but the worst possible option iff thats the case as you loose your yearly £1000 allowance and added together can reach a higher tax band when added to your income

It's nothing to do with tax band. If a basic rate taxpayer was getting paid yearly or monthly and they earned £1k per year interest they would pay no tax. If they had invested for 2 years and earned the same amount, they would pay no tax in Y1 but because they received the interest in Y2, they would pay nothing on the first £1k but 20% of the second £1k interest, so £200.

 

[Koolpc]

maybe its tax deducted ??
5% on 110k is 5500 so 4400 after tax
to earn 12k has to be more than one years worth or around 300k

£12k is what he earns at work! Lol...i did say that in my original post above. Thats his yearly wage.

 

[Koolpc]

Just for clarity:

His job pays approx £12k a year

He received approx £4k interest on savings he has, non ISA.

Will he get taxed on that interest as it wasnt deducted by bank..