Paying taxes on UK savings?

[RingoFan]

Hello everyone,

Fantastic community here - I'm really delighted to have found Ben's YT channel, and this forum!

I've been fortunate enough to have lived in Japan since August 2003.I have savings in an HSBC (UK) savings account that I really only ever touch when visiting relatives with my family, to pay for AirBnB accommodation, food etc. while in the country. So the savings have just sat in my account, gradually earning interest.

In all honesty, up until recently, I was unaware that I was required to pay tax on that interest. However, I'm keen to take the necessary steps to declare and if necessary backpay any tax. I have a number of questions regarding this topic:

1. Am I correct in assuming that for the first 5 years living in Japan, I was not legally obliged to pay tax on my UK savings interest? I.e. the tax should be payed on interest received *after* August 2008?

2. HSBC's online banking does not seem to allow statements beyond the past three years or so to be downloaded. Therefore, I called the bank to request annual statements for my savings account (which opened in November 2008). Unfortunately, they could only provide details regarding the annual interest earned each year. More over, this interest was calculated for the tax year (6th April ~ 5th April the following year), not the calendar year. Still, I thought that this information would still be useful, so I noted down the gross and net interest amounts earned for each year since the savings account had been open into a spreadsheet. Interestingly, from the 2016~2017 tax year, the gross and net interest amounts were equal (i.e. it was not taxed) - am I correct in thinking that this was due to the Personal Savings Allowance introduced in 2016?

3. After calling HSBC, I added another column for each year for the average GBP:JPY exchange range (between April and April of the given year), then another column calculating the amount of gross interest received in JPY, and finally another column multiplying this amount by 0.20315 (20.315%), to approximate how much tax in Japan I ought to have paid on my UK savings interest. Is this simple method correct? Would it be sufficient evidence to file back-taxes on my UK savings interest, or I would I need additional support documentation?

4. As other UK expats will surely be aware, interest rates were very low from the period of 2009~2022, so the interest earned on my savings was pretty insignificant - ranging between £15 to £200 depending on the year. Given the relatively small amounts, is it really worthwhile filing taxes for those years?

5. From 2022 onward, BoE interest rates rose considerably, obviously resulting in larger earnings on my savings. Perhaps I should just file taxes for 2022 onward?

6. Is it worthwhile hiring a tax consultancy firm to assist with backfiling taxes? If so, are there any RetireJapan forum recommendations for firms that are familiar with advising UK expats?

7. In June 2023, I moved the majority of my UK savings into a Skipton International fixed rate bond account, which had an 18 month maturity. That bond matured earlier this month, with the investment and earned interest paid back into my HSBC account. This earning I will definitely declare, and I have the necessary support documents to do so. However, am I correct in thinking that I will not be required to declare this earning until *next* March, as the investment (being an 18 month bond) matured in January 2025?

My apologies for all of these most likely newbie questions. Many thanks in advance for any advice or pointers that you may be willing to offer.

Cheers,
James
x

[Beaglehound]

In your shoes, I would declare for 2024 in the upcoming tax window (mid Feb to mid March), doing the yen conversion on the actual day the interest entered your account. This is not difficult via kakutei shinkoku (no advisor needed). You are right that interest which accrued this year would be filed next year.

If the tax office then enquires about previous years, then I would deal with it, but they would not be going all the way back to 2003 or 2008.

[RetireJapan]

Welcome to the forum! I second Beaglehound's suggestion: file the current year correctly, and see if they ask you about previous years.

If you are an employee, and your employer does your taxes for you at the end of the year, and you don't otherwise file a tax return, you can ignore 200,000 yen's worth of miscellaneous income (total, from all sources, for the year). Assuming your interest was less than that, you wouldn't have had to file it anyway.

https://www.jcb.co.jp/corporate/special/side_job.html

[adamu]

If you are an employee, and your employer does your taxes for you at the end of the year, and you don't otherwise file a tax return, you can ignore 200,000 yen's worth of miscellaneous income (total, from all sources, for the year). Assuming your interest was less than that, you wouldn't have had to file it anyway.

This is true for national income tax, but not residence tax (also covered in that link: 20万円ルールの落とし穴)

[RingoFan]

Thank you for replies, and for the warm welcome!

In your shoes, I would declare for 2024 in the upcoming tax window (mid Feb to mid March), doing the yen conversion on the actual day the interest entered your account.

In the case of my HSBC savings account, the interest is paid monthly. Does that mean that I would need to do the yen calculation for the first day of each month for 12 months?

If you are an employee, and your employer does your taxes for you at the end of the year, and you don't otherwise file a tax return, you can ignore 200,000 yen's worth of miscellaneous income (total, from all sources, for the year). Assuming your interest was less than that, you wouldn't have had to file it anyway.

Yes, I file the nenmatsu-chousei （年末調整） through my employer's intranet. Looking at my spreadsheet, the largest annual interest I have ever received from my UK savings account was far below 200,000 JPY (regardless of the exchange rate), so if this means that I would not need to declare this income, that'll obviously be a weight off my mind.

This is true for national income tax, but not residence tax (also covered in that link: 20万円ルールの落とし穴)

Oh...
So I would have to declare it, but only at a rate of 5%, not 20.135%, correct?

Thanks again!
James
x

[adamu]

This is true for national income tax, but not residence tax (also covered in that link: 20万円ルールの落とし穴)

Oh...
So I would have to declare it, but only at a rate of 5%, not 20.135%, correct?

I believe so, but I'm not sure whether the rate would be 5% or 10%.
Note that if you also paid UK tax on the interest, you could possibly claim that back as a foreign tax deduction on your Japanese taxes.

If you go ahead, the whole thing is probably going to cost you and the municipality more to process than tax you'll pay.

[adamu]

You've got me curious now. I'm not sure if this is a nationwide thing, but this page from Kagoshima says that you can only add missing income to the last three years.

https://www.city.kagoshima.lg.jp/faq-ku ... i/q85.html

[captainspoke]

You've got me curious now. I'm not sure if this is a nationwide thing, but this page from Kagoshima says that you can only add missing income to the last three years.

https://www.city.kagoshima.lg.jp/faq-ku ... i/q85.html

I think that when/if the NTA audits someone, they go back three years.

If they find something dramatically wrong, then they can go back five.

And I think five is the limit.

[Gareth]

7. In June 2023, I moved the majority of my UK savings into a Skipton International fixed rate bond account, which had an 18 month maturity.

How did you do this? I used to have an account with Skipton but they refused to change my address to my address in Japan and refused to let me buy new products because I wasn’t a U.K. resident. I had to close the account.

[Beaglehound]

7. In June 2023, I moved the majority of my UK savings into a Skipton International fixed rate bond account, which had an 18 month maturity.

How did you do this? I used to have an account with Skipton but they refused to change my address to my address in Japan and refused to let me buy new products because I wasn’t a U.K. resident. I had to close the account.

It's Skipton's offshore account. Discussed in this thread:

viewtopic.php?t=4175