Hidden liabilities down the line for the grey gene

Untaxed interest liabilities on deposits with increasing interest rates.

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These days I restrict myself to family financial affairs.Both my mum and mother in law sit on large deposits to fund current and future care costs(11% increase this January).They were ok when their deposits were attracting 1% returns;but I moved them onto 5% plus rates which means exceeding the exemption on interest received;plus probably the savings rate(to the uninitiated not straightforward).Both are likely to require tax returns for this year.There must be a considerable number of non taxpayers or at least pension only taxpayers who do not realise they have fallen into this trap.I cannot see how HMRC are going to identify this cohort,and when they do will they be soft on interest and penalties for FTN ?

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Intercity
By Mr Hankey
02nd Nov 2023 11:15

I've thought the same, with higher interest rates there must be lots of people needing to pay tax on interest income who don't realise. Those with private pensions could have this included within their PAYE code, but those with state pension only, not so easy.

I expect HMRC will find these people, there is supposedly a system where banks & building societies inform HMRC of interest income- I've seen many PAYE coding notices where there is an adjustment for interest received, supposedly where banks have informed HMRC of the figure. Often these numbers look like they've been picked out by someone randomly throwing darts on a dart board though.

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Replying to Mr Hankey:
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By Not Anonymous
02nd Nov 2023 11:23

They are required to report interest to HMRC.

https://www.gov.uk/guidance/bank-and-building-society-interest-returns

For someone who doesn't meet the Self Assessment criteria and only income is from State Pension and interest then HMRC will issue a Simple Assessment.

Which I think was at least in part created for this very reason.

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By Michael Davies
03rd Nov 2023 09:58

The point I am making of course is that the elephant in the room ,is that the majority of this cohort have no idea of their tax obligations and the potential penalty and interest arising.This is true of both of my “mums”;they are both in their nineties.
Since Hector,HMRC have been reluctant to apply TV and radio advertising,which could be applied to trigger a warning with this cohort.I am pretty sure yield would far exceed costs.
As to FTN,I would have thought a letter to HMRC notifying them of liability should suffice.Of course HMRC,lose most letters;so an independent witnessed copy should be kept.Who knows?

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Replying to Michael Davies:
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By David Ex
03rd Nov 2023 23:15

Michael Davies wrote:

The point I am making of course is that the elephant in the room ,is that the majority of this cohort have no idea of their tax obligations and the potential penalty and interest arising.

Indeed. What was the rationale for moving to payment of interest gross in the first place. Seems to be another poorly thought through (if thought through at all) measure.

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By Wanderer
04th Nov 2023 09:29

Similar likely to apply to Residential Management Companies who possibly have never made a return.

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