Finalising Your Tax Affairs

The Missing Link - Bank Interest

15 August 2010

One of the most causes of hold ups in finalising personal tax returns is not as you would expect the derivation of the income from self employment, but interest received on personal bank accounts.

The reason for this is two-fold:

• •  Many tax payers forget that the self assessment return is a statement of ALL income regardless of what has been taxed already and so do not collect or record interest received,
• •  Many banking institutions and building societies no longer now provide a certificate of bank interest and tax deducted for the tax year – presumably in an effort to save money/save paper

That said, for the majority of clients , this should not be a reason to delay finalisation of your tax affairs.

We have put together a step by step guide on how you can obtain this information:

• •  Remember, most importantly, that for your personal tax affairs, your accountant will need interest credited (added) to your account between the year 6th April and the 5th April
• •  Remember to include ALL accounts – but please ensure you make your accountant aware of which accounts are in sole or joint name. Interest received on joint accounts will be split 50/50 unless you advise otherwise
• •  Collect all your bank statements together for the relevant tax year and check that all statements are complete. Alternatively, download them if you have internet banking.
• •  Look for interest credited (added) to your account – interest and bank charges are not required for this purpose
• •  Be aware of the frequency of the interest added and whether it was credited gross or net of tax. Most banks will credit interest to your account net of tax unless you have told them that you do not pay tax. Interest may be credited monthly, quarterly or yearly depending on the account
• Record all bank accounts and interest received. Your accountant will need:
  •       •  Name of bank account
  •       •  Account Number
  •       •  Whether the account is held in sole or joint name
  •       •  The split of income on a joint account if not 50/50
  •       •  Interest received and confirmation of whether it was net or gross of tax