Colin Leake Posted April 23, 2015 Share Posted April 23, 2015 One for the experts. Just how will or does this work. Normally unless one fills in a form to say one is not earning enough to pay tax or have an isa standard rate tax is deducted at source and one has to pay any extra on higher rate tax later. Under this new scheme how does say a Building Society know not to deduct standard rate tax on the first £1000 of interest when another source of savings interest may also be making the first £ 1000 of income tax free. Can one nominate the source say in our case the 65+ bonds which would make the even more attractive. Keep the answers simple please. Link to comment Share on other sites More sharing options...
Robinhood Posted April 23, 2015 Share Posted April 23, 2015 ...as the process will take the great majority of people out of paying tax on bank and BS interest, the process will be reversed when it is introduced, and ALL such interest will be paid gross (as opposed to, by default, net at the moment). If the £1000 interest limit is exceeded, then it will need to be declared through self-assessment, and any unpaid tax will be reclaimed by HMRC through a one-off tax bill, or adjustment of the tax code. It isn't a huge give-away; at the maximum it is worth £200 p.a (higher rate taxpayers get a lower (£500) tax-free allowance, equalising things up for them. At current interest rates, you need to have a very large amount of money in such savings to be earning the £1000 in interest. Link to comment Share on other sites More sharing options...
Dave225 Posted April 29, 2015 Share Posted April 29, 2015 An interesting question, and I do not know the official answer. However, I suspect that as all interest paid to UK citizens is declared by the bank/building society to the tax man anyway, they will just addit up and make an allowance on your tax return for the £1000. This means you pay the tax up front, but get it credited back at the end of the year. To avoid that you need to fill in a R85 for each account, as long as you meet the rules for being a non taxpayer. Sorry, but I cannot see the banks/building societies paying interest gross, as that would make things complicated and liable to abuse, and that of course does not please the tax man. Link to comment Share on other sites More sharing options...
Robinhood Posted April 30, 2015 Share Posted April 30, 2015 ....I can assure you Dave, that there is advice on Gov.Uk (can't find it at the moment as I am away from home on a different m/c) which defines that it will function exactly as I've set out above. Interest will be paid gross, and any excess will have to be declared though self-assessment. The following link confirms the payment in gross, but not the self-assessment process - which is on the info I can't find from here. https://www.gov.uk/government/publications/personal-savings-allowance-factsheet (Though you are correct, and the institutions do have to account for interest paid to HMRC) Link to comment Share on other sites More sharing options...
Dave225 Posted May 1, 2015 Share Posted May 1, 2015 Very interesting, and thank you. I had not seen that sheet. However, my cynical mind sees at least 2 caveats. Firstly, if 'the other lot' get in next week they may decide to cancel it as it does not take effect until next year and secondly, this may mean a lot more people having to fill in self assessment tax returns to ensure they are legal. On the positve side though, I would actually get a little more cash in the pocket, so Hooray to that one. Link to comment Share on other sites More sharing options...
Robinhood Posted May 1, 2015 Share Posted May 1, 2015 ...with current interest rates, you would need maybe at least £70K on deposit to get that sort of interest (£140K per couple, and take care in maxing out the allowance). I suspect there is not a lot of the country that has that level of savings (apart from the affluent members of forums for expensive hobbies ;-) ) I also suspect many that have are already doing self-assessment. What would be interesting is an increase in interest rates such that more people were over the limit. They'd probably have to adjust the arrangements, or collapse under a wave of self-assessment. What's your bet on a) the facility being withdrawn, or b) the threshold being raised in line with interest rates? :-D TBH, at one time I'd have bet it was a sign that the treasury were expecting interest rates to remain low for a very long time, but nowadays, I think they've forgotten about the law of unexpected consequences. Link to comment Share on other sites More sharing options...
Brian Kirby Posted May 1, 2015 Share Posted May 1, 2015 Robinhood - 2015-05-01 5:47 PM....................TBH, at one time I'd have bet it was a sign that the treasury were expecting interest rates to remain low for a very long time, but nowadays, I think they've forgotten about the law of unexpected consequences. Cynic here! I just see it as another sign of a slide towards clientelism. Greece beckons! Oh dear! Link to comment Share on other sites More sharing options...
Robinhood Posted May 1, 2015 Share Posted May 1, 2015 Brian Kirby - 2015-05-01 10:46 PM Robinhood - 2015-05-01 5:47 PM....................TBH, at one time I'd have bet it was a sign that the treasury were expecting interest rates to remain low for a very long time, but nowadays, I think they've forgotten about the law of unexpected consequences. Cynic here! I just see it as another sign of a slide towards clientelism. Greece beckons! Oh dear! I'm sure some of us won't be bought so cheaply!......... ...will we?...... :-S Link to comment Share on other sites More sharing options...
Brian Kirby Posted May 2, 2015 Share Posted May 2, 2015 Robinhood - 2015-05-01 11:02 PM.....................I'm sure some of us won't be bought so cheaply!......... ...will we?...... :-S I wish! :-D Link to comment Share on other sites More sharing options...
Dave225 Posted May 3, 2015 Share Posted May 3, 2015 Robinhood - 2015-05-01 5:47 PM ...with current interest rates, you would need maybe at least £70K on deposit to get that sort of interest (£140K per couple, and take care in maxing out the allowance). I suspect there is not a lot of the country that has that level of savings (apart from the affluent members of forums for expensive hobbies ;-) ) I also suspect many that have are already doing self-assessment. What would be interesting is an increase in interest rates such that more people were over the limit. They'd probably have to adjust the arrangements, or collapse under a wave of self-assessment. What's your bet on a) the facility being withdrawn, or b) the threshold being raised in line with interest rates? :-D TBH, at one time I'd have bet it was a sign that the treasury were expecting interest rates to remain low for a very long time, but nowadays, I think they've forgotten about the law of unexpected consequences. I agree with your numbers but, there may be more amounts in savings accounts than you think. You should also include ISA's which i know are tax free, but if there is a better rate outside, and then no tax to pay, people may opt to change. I for one am thinking of doing so with our small pots. I am not able to bung 15k away each year so if and when rates do rise on ISA's again, I will opt back in. There is a small, but discernible difference between getting 1% and 3%, and every £1 in my pocket is a bonus. One other advantage I see in this, if it comes to pass, is that I can stop having to separate my wife's accounts with mine as she is a non taxpayer, while I am. Mind you, at the end of the day she tells me, what is mine is hers anyway etc. Link to comment Share on other sites More sharing options...
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