For the first time in a long time, we’re receiving some decent interest this autumn on NS&I accounts in the UK.
My husband is registered for self-assessment and files a UK return every April, although up until now the only income to report has been UK rental income. Which is of course taxable in the UK.
I understand that, under the bilateral tax treaty, UK bank interest is taxable in France, not the UK.
So come next Spring, should he also declare the UK bank interest in his UK tax return? Even though it is not taxable in the UK?
We use 123filing software to file the UK tax return, which calculates your tax bill for you at the end, provisionally.
I’m not sure it’s sophisticated enough to work out that any UK bank interest declared is in fact not taxable in the UK.
Thanks, Tim, I know about the extra £1000 allowance for savings. But I don’t think it’s relevant in our case. First, the income is not taxable in the UK. And second, the interest payments will be greater than that allowance.
The question is, do we need to report the UK bank interest in the UK tax return? Even though it is not taxable in the UK.
The interest will of course be paid gross and will be declared and taxed in France.
Obviously the simplest solution would be to NOT report it in the UK tax return (which we will continue to file anyway because of the UK rental income) and to simply declare it in our French tax return.
But is that what HMRC considers the correct procedure?
Please tell me we don’t need to go through some ridiculous malrkey, ie declare it in the UK and pay tax on it in the UK and then try to claim the tax back through a DTT form.
If you are worried you can put a note in ‘any other information’ (page TR7) saying that you have not included uk bank interest because it is taxable in France as per the double taxation treaty. I assume your husband is completing the non-resident pages so it should make sense to them due to him being non resident. I do this relating to my husband’s state pension.
One option is to report the interest on the attached Help Sheet 304, at least for the first tax year, if only to make it clear to HMRC that you are claiming tax treaty exemption on the interest. I only did this for my UK pension income, but the help sheet clearly anticipates it covering other sorts of income… Personally I would - in your husband’s scenario - simply do a ‘white space’ note, as suggested by Amanda - the help sheet is more of a ‘belt and braces’ approach.
In my own case, I also wanted to get their subsequent agreement to being exempted from filing returns going forward (which was granted) and thought it would show good faith to do things properly.
Super, thanks George.
Our UK return is done using the software 123filing, who submit it for us.
I don’t think there’s any option to include attachments.
So if we did submit that other form as well, would we send it to HMRC by post?
Sorry if I’m being a tad thick. It’s Friday night and it’s been a long week!
I agree with Chrisell - don’t report it on the return, but no harm in putting a note in the other info box (which apparently they don’t always look at but at least your explanation is there if there is any query later)
I think there are two questions here. One is whether you actually need to claim the exemption from UK tax on the interest under the tax treaty, the second is, if so, how.
Strictly, I think you need to actually claim exemption from UK tax under the treaty. More importantly HMRC seem to think so also. If you look at the Notes to the Non Residence pages, they expect you to make a claim for exemption under a treaty. That said,many do not, as others earlier on this thread have indicated. This probably ‘works’ for income on which no tax has been withheld eg UK bank interest, UK state pension etc. HMRC presumably have better things to do than to chase down people who technically should have made a claim but don’t, since there is ultimately no UK tax at stake. Best advice in my opinion is to make the claim.
If your software doesn’t allow attachments, then as Amanda and I have both suggested, make the claim on (what in the trade we call) the ‘white space’, the area of the return where you can make any comments to HMRC.
I would say something along the lines of “I claim exemption from UK tax on UK interest received in the tax year xxxx/xx under Article 12 of the UK France double tax treaty. I am a tax resident of France and a non resident of the UK.I can confirm that this income [has been/will be] reported to the Service des impôts des Particuliers in France (French HMRC) on my tax return for calendar year xxxx.”
The tax treaty between the UK and France generally determines where income should be taxed. For bank interest, the treaty typically allocates the right to tax the interest to the country of residence of the recipient. One more option here - check if this thomaston savings bank customer service might be able to give your more advices.
Thanks Ellie but that’s not the issue here. There’s no question that the interest is taxable only in France. The question, rather, is will HMRC officials be aware of that rule when they come to process my husband’s UK tax return and notice that while he’s declared UK rental income (as is proper), he hasn’t reported interest earned on UK accounts?
I’m not going to report the interest in the UK return but I am certainly going to take the advice given above and include a very polite little reminder right at the end.
How I do it: If it’s tax exempt in the UK (eg NSI savings, ISAs) then you don’t need to declare it in your UK tax return. If it is taxable in the UK (eg normal bank interest) than you will have to declare it in the UK.
Whether it’s tax exempt or not in the UK, you will have to declare it in your french tax return. Under untaxed interest for the UK tax-exempt interest (where no tax has been taken off), and under taxed interest for the rest if tax has been taken off.
For 2047. Under 230 (taxed interest) and 250 (UK tax-exempt interest).
A minor afterthought to my suggestions above. Another practical reason for referencing the UK bank interest received, whether in a ‘white space’ note, or elsewhere in a UK return, is that, these days, unlike past practice, HMRC will almost certainly have been provided with precise details of interest received from the bank concerned…
HMRC will now pass those same details onto the Impôts, under the Automatic Exchange of Information protocols.
Personally I think it probably unnecessary in practice to reference the interest received in subsequent years in future UK returns. This is on the basis that the taxpayer has already made the treaty claim at the outset, and those facts that support UK exemption under the treaty (eg remaining French tax resident,UK non resident etc) presumably continue unaltered.
First, I wasn’t aware that NS&I savings are tax-exempt in the way that, for example, ISAs are. I have always assumed that any interest earned on our NS&I savings account and bonds are to be treated in the same way as, say, interest on a Nationwide building society savings account.
Second, when one reports UK interest in one’s UK tax return (even though one is resident in France, meaning that such income is, under the treaty not taxable in the UK) , surely HMRC will - almost automatically - try to tax it? In which case one has to go through the whole palaver of claiming a refund? I don’t know how you file your UK tax return as a French resident (I’m assuming you are French resident), but for example the third-party software I use (123filing) calculates a provisional tax liability for me at the end. Which - so far at least - has always tallied with the amount HMRC actually bills me for.
No way is this software sophisticated enough to exclude any reported UK bank interest on the ground that I am tax resident in France.
What software do you use? I’m clearly missing a trick.
Thanks George. Yes, it was that exact same assumption that HMRC will have very detailed info nowadays about interest paid on UK accounts that made me wonder whether I should at least mention it - and the fact that in our case it is not taxable in the UK - in the UK return.
