Do you have savings?

My father died in the late 1960s. Hewas being investigated by HMRC for minor misdemeanors, and it was left to me to pay back any monies due.

Thank goodness their house was in joint names so my mother could buy something for herself. In her later years I was given POA, and had a joint cheque book. HMRC questioned the meagre interest accrued in that account. I had to asssure them it was all legit and the monies due were for her only.

That was in the days when you got a decent interest!

I ran a sole proprietor business, and was asked to provide details of that. I did so, but heard of nothing for a year. They did not have the courtesy to tell me all was OK.

I too have boxes of papers , including bank statements, CC likewise, just in case, far in excess of any timescale.

Why dont they pursue the Mr Bigs of fraud.

The family had friends who ran a guest house. Every year they went abroad via Switzerland! Nuff said

Interest earned on savings is shared with the dwp.

This only dawned on me a few years ago when a neighbour got into trouble for not declaring large amounts of savings in his tax return ( France again, but I think it might be an EU ruling.)
Information is then sent from the tax office to various govt. depts who deal with allowances such as house taxes and social benefits.

monica you are right.

Interestingly the information flow between the various government departments has not always been the case, only in relatively recent years.

You are obliged to keep your documentation for 6 years.

Some tax enquiries can go back as far as 25 years and 10 years is not unusual. I knew someone who was the subject of a special investigation. It was horrendous, took years and at the end they were in the clear but they had to try and redocument purrchases and savings that had come and gone and any documents destroyed. I now still keep all my paper records, mainly bank statements, for at least six years, just in case for any reason I inadvertantly do anything that may court suspicion.

I don't think we disagree greatly on this, Monica. It seems to me, though, that it's the banks who monitor things in the first instance; for a start, if you pay a lump sum into a new savings account, you are asked to say where you got it (savings, legacy etc). The banks have the responsibility of checking for money-laundering etc, and then inform the authorities if there are suspicious transactions.

I think the in-depth investigations by HMRC would only be possible on an individual, case-by-case basis, when they were alerted to a suspicion of fraud, and even then I think the trail would go cold if you went back more than a few years. The systems are not as robust and all-encompassing as might be imagined. Example: I recently had to re-register with the online Government Gateway system to get a tax rebate due to me; I had already registered a few years ago, but my name and NI number were not recognised and I had to start again as a new client.

GTT, I said exactly what you said in your post. HMRC has details of all interest and dividends you receive. They do not have details of where everyone's capital assets are or what they possess. Similarly employers/pension payers make PAYE returns every yearWe are both saying the same thing.

However as HMRC bring together all the information on each tax paying individuals sources of savings and investment income, they do monitor it, so if your interest received suddenly jumped say, from £100 a year to £10,000 a year they may well come back to you and ask you about the source of funds that provided this revenue, in case you had suddenly had some great success in your career that meant an enormous increase in income that you had not declared and paid tax on but tucked a way immediately in an interest paying investment.

HMRC can also investigate your income, savings and spending patterns in a special tax investigation and can force financial institutions to give them details of all your monetary dealings with them.

HMRC also feed all this information to DHSS. So that they can compare the declared income of benefit claimants with what the tax records show and I know someone who had to pay back several thousand pound s of benefit for failing to declare the capital she had in one of her savings accounts.

What, everybody's accounts, millions of them, all sent to the Treasury, every year? I don't think so! Individuals are obliged now to inform HMRC only if they make over £1000 in interest, which won't apply to most people. Banks do have your NI number, and so I suppose they can keep a list of big spenders or big savers, but the obligation is on the taxpayer to do their own sums and submit their figures if they have a tax liability.

I am currently sorting out the estate of a deceased elderly relative who had loads of different savings accounts. I wish with all my heart that somebody other than me could have traced and claimed all the money due to the estate, but it was entirely up to the other executor and me. There is no central record of these things, more's the pity. HMRC knew what tax had been deducted from her savings interest, but that's all. They don't know what the actual interest rates were or what her total assets were, or what money went in and out of the accounts, or where it all came from or went to.

Yes they do, also company registrars and other financial institutions have to send details of all dividends and who they were paid to.

It has its advantages. If you have savings income the HMRC automatically has information on it so that it is not necessary for you to fill in a tax form every year

Yes I think they do

Don't British banks have to send reports to HMRC annually of interest on individual accounts?

lilypollen, I think you give the banks and the government too much credit! It might be possible for someone with special authority to delve into a particular, named bank account, but there's no record that links an individual's various accounts and financial dealings (even current, let alone going back many years). And banks are so careful about security now, even getting hold of your own records, let alone anyone else's, is difficult enough.

Grannyticktock, I think any government body could find access to your savings history if they deemed it necessary : (

jane10 your post gave me Goosebumps, Dads are amazing aren't they

Yes - the children are ultimately responsible if the parents run out of money.

Good point Welshwife.
In France families have to pay for the care of an elderly relative - all members of the family together, means assessed.

This tax does not affect us but in France if you have more than I think it is 1.3million in assets (not including your home) you need to pay a wealth tax yearly. This does affect people who have their own pension fund as that is counted as an asset. I have no idea of the percentage etc.
Maybe something like this could be levied in UK to help with the care fee problem.

Yes, Gillybob, the 2 threads seem a good fit. But I do not see anyone squirreling money to avoid care fees.

I and others do advocate lowering assets for estate tax, a totally different matter to care.

This thread should be read alongside the
who will pay for your care thread. Infact they should be merged.
Squirrelling money away to avoid tax just leaves someone else ( possibly with very little) to pay for your future care.

I know pensions go away, but pensions can and do pay for care or living expenses for the living people. I was mixing uses of assets, sorry I was not clear. Thank you for explaining the interests, I will never understand maths, but that is to me not your writing.

Norah you either pay the interest monthly as you would with an interest only mortgage or the interest gets added to the capital you borrow instead, so that you make no payment and you then pay interest on the new higher balance.

An example
You borrow £10,000. First year interest is £1000, which you roll up, so at the end of that year you have borrowed (£10,000 + £1000) £11,000. The next year you incur another £1000 interest on the £10,000, plus interest on the £1000 interest you didn't pay the previous year, which is £100. So the capital you pay interest on the second year is (£11,000 + £1,100) £12,100. so each year the balance owed by your estate rises by the added interest, on the new cumulative sum. So the debt owed back increases with each year.

As far as the value of her assets go. She is still living in the same house with the same high value but when she dies the money she has borrowed - and spent - will need to be repaid so it is a debt to be paid from her total estate.

Let us say her house and any savings are worth £400,000 and she borrowed £75,000. The value of her estate after repaying the equity release loan, for that is essentially what it is, will reduce the value of her estate to £325,000. Inheritance is paid on the value of your estate after paying all your debts. so no inheritance tax will be due.

A pension is an income and dies with the death of the recipient, so that does not come into any calculations on inheritance tax.

M0nica, "My friend's house is valuable, so she still has a significant amount of capital left in it after giving money away. The inheritance tax limit is £325,000. Because she has a substantial pension income, if she went into care much of her care would be paid from income with capital topping it up, although if her property were let, she lives in central Oxford, it would probably cover the difference. So her capital assets would probably last, much longer than she would."

This is precisely what I post in this and the other thread. I did not understand the interest maths, and never will, that is why I asked to that bit. But without equity release, because I am daft on that bit, I arrive at the same conclusion as to the assets of home and pension.

My friend's house is valuable, so she still has a significant amount of capital left in it after giving money away. The inheritance tax limit is £325,000. Because she has a substantial pension income, if she went into care much of her care would be paid from income with capital topping it up, although if her property were let, she lives in central Oxford, it would probably cover the difference. So her capital assets would probably last, much longer than she would.

On interest, you do not have to roll up the interest when you take equity release. You can choose to pay the interest, as if you have an interest only mortgage, but say mortgage rates double or more, (remember 10% mortgage rates?) my friend can then opt to roll up her interest or roll up part of it.

This example is all getting rather detailed and laboured. The point I was trying to make is that Equity release is a marmite product, for some people, like my friend it is ideal. It enables her to help her nieces when they both need help and because she has a sufficiently large pension she can comfortably pay the interest rather than rolling it up and still not have to worry about paying for care should she need it. For other people it is a totally unsuitable product for a variety of reasons.

YES, Jane10, that is why I see a plan involving assets and care insurance as implicitly fair.

That's the fundamental question norah and Monica. If we could be sure that would help but we can't know how our care needs might escalate or again might not!
Insurance of some sort would be good.