What do I have to do to start paying tax on the interest on my bank accounts?

Question

When I stayed at home to look after my kids, and therefore didn't pay tax, I didn't have to pay tax on the interest I earned on my current and savings accounts. I have now gone back to work. Now that I am a tax payer, how do I reverse this? Do I need to go to my bank or get some form from the tax office? Is there something I can fill out online? Really not sure what to do. Please help.

Answer 1

It seems that not many know how the system works. Ordinarily tax is deducted at source by the bank but I assume you have previously signed a form R85 to have the interest paid to you gross.

You now need to contact the bank and tell them that this is no longer applicable. They will then start deducting tax again.

Some banks will require you to fill a form in for them but many will act on a letter.

Answer 2

Interest earned from savings, sometimes called 'unearned income', is taxable at the rate of 20%, so that if you earned £100 in interest, the taxman wants £20.

The best way of sorting this out is to contact your tax office. There should be a contact of sorts on your pay-slip. If not, then your firm will know. Otherwise you can just visit the local tax office in your town which is usually located in the town hall. If not, it's in the phone book.

In the case of such as Income Bonds they send me an annual statement which shows how much interest was paid. It's dead easy, using this to work out the tax and the taxman usually does all the hard work. All i ever do is fill out the form which they send.

You can do a tax return online if you like. Just go to their website and sign up etc.

Free UK PAYE Tax calculator 2007. Updated for 2007 budget ...UK PAYE Tax Calculator. Calculate earnings, income, wages, salary, earnings and tax paid for free.
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HM Revenue & Customs Self Assessment Internet pages. ... Did you know that you can complete and send back your Tax Return over the Internet? ...
http://www.hmrc.gov.uk/sa

Answer 3

That depends upon the interest rate. If it's your only income, as a dependent you will start paying tax on the interest once it exceeds $850 in any tax year. It doesn't matter if it's all in one account or scattered among several. If you have earned income in addition to the interest, tax will kick in on the interest at lower levels, as low as $300 if your earned income in 2008 exceeds $5,150. If your interest income is your ONLY income and it's less than $850, then you do NOT need to file a tax return.

Answer 4

Normally the bank will deduct tax on interest automatically, you will show the full amount earned & tax paid on your annual tax return. Just check that the bank is deducting & relax.

Answer 5

As far as I'm aware the bank will notify the tax office (and you) of the interest applied to your account.

Usually the bank will automatically pay it to HMR&C on your behalf and show it as a debit on your statement.

If they're not collecting it as you think they should - then notify your tax office directly and advise them - it's always best to be up front with HM - less chance of them making a mistake if you're on the ball!!

Answer 6

A far as i know, your bank will automatically pay tax on the earned interest to the HMR&C

Answer 7

All tax is taken automatically. Banks will take off the tax before giving it to you, just like your wages.

Answer 8

whether your working or not your savings are subject to tax on interests but you dont have to worry about paying tax on interest earned as its deducted at source before you get the interest payment. its all taken care for you.

Answer 9

I assume you've certified yourself as a non taxpayer. Just inform the bank that this no longer applies and they will start to deduct tax.