The short answer is that "yes" you do need to disclose this income. Assuming that you are resident and domiciled in the UK, all of your worldwide income – including any interest earned through offshore accounts – must be reported to HM Revenue & Customs (HMRC) on your tax return.
UK resident and domiciled taxpayers are often confused about the advantages of having an offshore account, but the only benefit is usually that these accounts offer a slightly higher rate of return than accounts offered in the UK and the interest is paid gross. It doesn’t remove the fact that you still have to pay UK income tax on the interest you received.
The article you have read relates to a new disclosure initiative issued by HMRC that will allow taxpayers to disclose details of unpaid tax linked to offshore accounts or assets and receive a favourable penalty rate of 10% penalty. The New Disclosure Opportunity (NDO) will run from 1st September 2009 to 12th March 2010. If you choose not to take this opportunity and are subsequently found to have undeclared tax liabilities, you may face a penalty of 30% or more.
By Jo Nockels
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