His Majesty’s Revenue and Customs (HMRC) has explained a tax rule which all savers need to be aware of, including those using Individual Savings Account (ISA).
The rules concern how much people can make in interest before having to file a self-assessment and pay tax on it.
Responding to a query from a customer on a popular social media platform, X, who wanted to know whether they had made enough to pay tax, HMRC cleared up the situation.
The person had asked if they would need to fill in a self-assessment tax return if they were earning more than £2,000 a year in interest.
HMRC explained it would need to be over £10,000, depending on the type of account. The tax authority replied: “If you have more than £10,000 from dividends or savings and interest, you would need to complete a self-assessment tax return.”
Speaking on ISA, the HMRC noted that the account is tax-free, including some NS&I accounts.
“If you have an Individual Savings Account (ISA), this is tax-free as well as some National Savings and Investment (NS&I) accounts.” According to Express, people can save up to £20,000 a year in ISAs with no tax to pay on the amount.
It explained further with the rules, savers get a starting rate allowing them to earn £5,000 in interest each year without paying tax on it, but this reduces by £1 for each £1 you earn above your personal allowance, of £12,570. Those on the basic rate of income tax can earn up to £1,000 a year in interest tax-free, which drops to £500 if you are on the higher rate and then to £0 for those on the additional rate.
NS&I customers with Premium Bonds also have no tax to pay on any prizes they win in the monthly draw, and NS&I has a Direct ISA and a Junior ISA.
(BirminghamLive)
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