Tax on interest over £1,000

[Junipar]

How do HMRC know if you've earnt more than £1,000 in interest in a year? I've earned slightly over this the last few years and as far as I know, I haven't been taxed. Am I meant to be declaring it?

Yes you are supposed to tell them

How much do you earn and what type of savings are you earning interest on?

Remember interest on Isas don't count towards your allowance.

I'm a basic rate taxpayer and most of my money is in fixed rate savings accounts (not ISAs)

This is why you should have savings in ISAs and not fixed rate!

This isn't always true. If you are employed (not completing a self assessment) and the saving are not in a tax free wrapper then the bank/building society will notify HMRC.

" not employed, do not get a pension or do not complete Self Assessment, your bank or building society will tell HMRC how much interest you received at the end of the year. HMRC will tell you if you need to pay tax and how to pay it."
From here
www.gov.uk/apply-tax-free-interest-on-savings

Not necessarily some of the interest rates on isa’s haven’t been that good lately so sometimes it works out better if you get a good fixed interest rate and pay the tax

So your bank will notify HMRC OP and your tax code is then normally changed.

Is there any reason why you don't have an ISA?

It's only been slightly over £1k and the interest rates are so much better on savings accounts.

I assume HMRC hasn't been informed by my bank because I've got savings with lots of different banks. Is there any other way of them finding out?

The bank/building society has your national insurance number and notifies HMRC on interest earned each tax year whether within the £1000 interest or over. Have you logged onto your government gateway a/c as that shows interest and tax codes?

I've just checked - nothing about interest on my account.

Why are you trying to get out of paying tax?

You have enough savings to earn over £1000 in interest & you're trying to avoid paying a few pounds in tax?

Just ask for a tax return & declare it!

You should declare it

I work in tax. The system where the bank notify hmrc is still fairly new and you cannot yet rely on this happening automatically and it is your responsibility to inform hmrc. If your interest is less than £10k and you don’t have any other non paye income then you don’t need to do a tax return. The easiest way is just to call hmrc and advise them of the additional tax for the year, although do it when you have time to wait on hold for a while

Thank you. Should I do it for previous years?

If it’s just a small amount you owe, you just need to call them and pay it - don’t need to do a tax return. Saying that, completing a tax return for just interest over £1k is very quick and easy. You won’t have to pay much if its just over the £1k. If you earn less than 50k (including the interest as this counts as income), then you will only be paying 20% on anything above £1k. As others have said, ignore anything thats in an ISA or tax free wrapper

Thank you