interest income

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    ayish
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    when the statement is “interest earned from building society deposit is 12000″ does it mean that it is already grossed,n we dont need to gross it for tax purpose??


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    tick_tock
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    • Topics: 5
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    Building society interest is received net of basic rate tax. You’ll have to gross it up before slotting into an income tax computation.


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    ayish
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    so there is no diff between earned and recieved??in both cases we have to gross it up?


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    mrjonbain
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    A key point is that according to tax law interest from a source such as a building society account that is not paid to an individual or credited to their account during a tax year is not taken into consideration as income for the tax year in question. In terms of working out whether to gross up the interest the question should contain enough information to make it clear whether or not you need to undertake this process. Generally, as previously stated by the original responder to your question, you should assume that interest has been received net of tax at the basic rate as this is generally the position when considering interest income from building society and bank accounts.However, it could be possible that the account in question could be an ISA account which wil have to be stated in the information accompanying the question. In this case you should leave the income out of tax computation and state why you have left it out of the computation- it is not legally taxable income.Another case where interest income can be paid gross is where the account holder has made a declaration to the bank or building society that he is not a taxpayer and that he wishes to have his interest paid gross.I am not sure if this second possibility is part of the F6 syllabus.

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