High earners removed from Self Assessment
High earners removed from Self Assessment
The increase in the earnings income threshold to £150,000 means that over 300,000 taxpayers will be removed from the requirement to file a self assessment tax return with HMRC.
Up until 6 April 2023, any taxpayers with earnings above £100,000 were required to file a tax return, even if all of their income was being taxed at source through PAYE. This threshold increased to £150,000 from 6 April 2023 and was removed altogether from 6 April 2024.
Whilst this is welcome by a number of taxpayers whom HMRC has informed they no longer need to file a tax return, taxpayers often incorrectly assume that they no longer have tax to pay. HMRC states that you only need to submit a tax return when your ‘income from savings or investments is over £10,000.’
However, there is a bit misleading. With rising returns on savings and investments, taxpayers should be aware that interest will still be directly subject to income tax if it exceeds the personal savings allowance (PSA) of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. Additional rate taxpayers receive no PSA!
Also, income from dividends will be subject to income tax if it exceeds the dividend allowance, which is currently £500 (£1,000 in 2023/24).
Banks are required to notify HMRC of interest and HMRC will then seek to collect tax through a PAYE coding adjustment in the first instance.
If taxpayers do not have sufficient PAYE income to collect the tax on savings and investments or if there is a delay in HMRC becoming aware of an amount of savings or investment income, HMRC will notify the taxpayer with a tax demand.
Taxpayers should be aware that there is no similar system for dividend income, so taxpayers with taxable dividends of more than £500 but less than £10,000 will now need to inform HMRC to have the tax collected.
If you are not sure what to do, please get in touch with us here at Kennedys Accounting and we will be pleased to assist you to ensure that your tax is completed correctly, however much your income is.