Increased self-assessment requirements due to rising interest rates
Over the past 18 months, the UK has experienced a significant rise in interest rates, resulting in many basic rate taxpayers exceeding the £1,000 savings interest threshold and consequently needing to submit self-assessment tax returns. This is due to higher returns on savings now surpassing the tax-free savings allowance of £1,000 per year for basic rate taxpayers (£500 for higher rate taxpayers).
Recent estimates indicate that an additional 1.4 million people may need to submit self-assessment tax returns starting from the 2023/2024 tax year. This substantial increase is driven by both rising interest rates and changes in the savings landscape.
It is crucial for taxpayers to be aware of these changes and to verify if they now fall into the category requiring a self-assessment. This can be done using HMRC’s online tools or by consulting our financial advisors at Lovewell Blake to ensure compliance and avoid any penalties associated with late or incorrect submissions.
Will you need to register for self-assessment due to increased interest rates?
If you find yourself in this situation, consider adjusting how you save or invest your capital by taking advantage of investment opportunities that can provide similar or higher returns compared to deposit accounts, but in a more tax-efficient manner. This can help you avoid the need to file self-assessment tax returns.
By exploring these investment opportunities, individuals who do not require immediate access to all their capital can consider longer-term investments that still offer access when necessary. This strategic management of savings can potentially alleviate the burden of completing self-assessment returns.
At Lovewell Blake Financial Planning, we recognise that everyone’s circumstances are unique. That’s why we offer independent advice tailored to your specific needs. With over 25 years of experience, our professionally qualified Financial Advisers are ready to provide a free initial consultation. We can help you meet your financial objectives, whether that means avoiding self-assessment where possible, planning for the future, or generating a higher level of tax-efficient income or growth.