HMRC issues warning to anyone that has more than £10,000 in savings

HM Revenue & Customs (HMRC) have sent an urgent message out to people that may have substantial savings sitting in their account.

The last thing anyone really wants to do is get into legal trouble for not getting their finances or taxes in check.

In response to a customer asking about their annual interest earnings and the tax that needed to be paid on it, HMRC had a detailed answer about what they should do, and if they need to complete a self-assessment tax return.

The tax body clarified if the customer needed to carry out a self-assessment tax return if their annual interest earnings were upwards of £2,000.

Doing your taxes is a mundane task, but it's important that you do it correctly (Getty Stock Photo)

Although the answer may vary by savings account, they provided a general explanation.

They stated: "If you have more than £10,000 from dividends or savings and interest, you would need to complete a self assessment tax return.

"If you have a Individual Savings Account (ISA), this is tax free as well as some National Savings and Investment (NS&I) accounts," the HMRC explained.

So if you are saving with an ISA, you will pay no tax on any interest or growth earned, up to £20,000 per year.

After this amount, you will have to pay tax on it.

Martin Lewis has previously spoken about the £10,000 in savings that may be sitting in accounts across the UK.

A starting rate for savings is also available for Brits to earn £5,000 in interest tax-free annually, though this goes down by £1 for every £1 earned above the personal allowance, which is £12,570.

Basic taxpayers can earn up to £1,000 in interest tax-free annually, which drops to £500 for higher taxpayers and down to £0 for those on the additional rate.

Where and how much you choose to save will affect how much you make from your investment (Getty Stock Photo)

If you're a customer with National Savings and Investments (NS&I) though, you won't pay tax on any prizes won in the monthly draw, while they also offer Direct and Junior ISAs.

Other methods of saving include Premium Bonds, which is more exciting, as you have the chance to win a prize each month, though the prize fund rate will be dropping next month, going from 4.15 percent to just four percent.

Prizes could be anywhere from £25 up to £1 million, with other sums up for grabs sitting at £50,000 to £100,000.

According to accountant David Kindness, who contributes to Best Money, 'it's generally recommended to invest larger sums' with NS&I, 'around £20,000 or more'.

"Those with smaller amounts often find their chances of winning anything slim, making the Bonds feel more like a lottery than a viable savings tool," he explained.

He went on: "High-interest savings accounts or Cash ISAs could be better options.

"For example, NS&I’s Direct Saver account offers a 3.50 percent gross/AER rate, which provides predictable growth. These options lack the excitement of a prize draw but deliver reliable results," Kindness highlighted.