tom123
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Tax due on interest (retirement etc)

Tax due on interest (retirement etc)

Speaking to my parents yesterday, I found out that they have both been told they have no need to fill out SA returns any more.

In my mums case that probably makes sense now that interest is paid gross. When you add that to her pensions she is still under the personal allowance, and she only used to fill out the returns in order to get the interest refunded.

However, my father is a tax payer (although not at 40% these days). He has the state pension, a personal pension, and interest. He used to have dividend income, but that is minimal now.

HMRC have coded an amount of expected untaxed interest in to his tax code - based on what he returned in 2013.

My question is this - are there currently mechanisms in place such that the revenue will eventually find out the actual amount of interest he received without needing a return? He will actually receive less interest in the upcoming year.

He doesn't really mind about the timing of things sorting out - ie the delay between being taxed on the basis of the code in one year, and catching up with actuals in the next - we just want to make sure that in a reasonable timeframe things true themselves up.

If they don't - then surely he should be asking to be in SA?

And if that is the case, I wonder why he was stopped from filing etc,

Thanks

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28th Feb 2016 10:31

PAYE

is the appropriate place where the criteria do not apply for SA.

The mechanism in place is your father - he still has a reporting requirement but it can be by telephone without the risk of penalties. If he knows his interest for the current year before say 31 Jan, which is quite common for annual interest accounts, he can phone it in. Chances are then that the correct code operates in February and any underpayment on dividends falls within the tolerance levels and will not be pursued.

If he doesn't know till after 5 April actual interest and dividends for the year he phones when he does, agrees both the income for last year and a deduction in code for the current year, and in due course will receive a calculation showing if there is any liability and if it is intended to collect. Again, once this has happened for a couple of years the chances of an underpayment being large enough to need to pay may not be high.  

Provided he always phones before mid December any liability can be coded as usual. 

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28th Feb 2016 10:44

Are you sure?

" I wonder why he was stopped from filing etc,"

Check what HMRC said. I think you will find they said he didn't HAVE to submit a tax return.

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28th Feb 2016 11:01

Agree with Peter

He doesn't have to file - but he may if he wishes.

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By tom123
29th Feb 2016 13:09

Thanks, I think we have a way forward - appreciate the help.

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