The Low Incomes Tax Reform Group (LITRG) is calling on couples to declare money held in joint accounts otherwise they might face penalties for non-disclosure, and has suggested to HMRC ways they can prevent people falling unwittingly into non-compliance in the first place.
HMRC started to use information about interest provided to them by banks and building societies in tax calculations and PAYE coding notices in late 2017. Although these data include details about interest received on accounts both in sole and joint names, HMRC only use details of interest on accounts held in sole names when calculating tax liability. If individuals receive interest on a joint account, they need to advise HMRC to ensure that it is included in their tax calculations, otherwise they may face penalties and interest on the tax due if HMRC later discover that the taxpayer should have paid tax on this income.
LITRG recommends to HMRC that messages concerning interest received on joint accounts should be included within the Personal Tax Account, on PAYE coding notices and on P800 tax calculations, to prevent people incurring, unwittingly, penalties for non-disclosure.
Most people have a personal savings allowance of £1,000. Provided that the interest they receive in the tax year is less than that, they have no further tax to pay on the interest. LITRG’s concern is that couples with non-retirement savings may receive interest that exceeds this allowance and therefore may be caught out.
Chair of LITRG, Anne Fairpo said, “Everybody who has taxable income is responsible for disclosing it to HMRC. People must not assume that HMRC have all their information on their savings; equally, they must not imagine that HMRC have not noticed their joint accounts. If HMRC discover that a taxpayer has failed to tell them about some taxable income, they can face penalties and interest on top of the unpaid tax. Penalties can be as high as 100% of the unpaid tax liability. We call on HMRC to ensure that it communicates effectively that while it is obtaining and making use of some information from banks and building societies, it is not automatically including interest received on joint accounts in tax calculations.”
