Savings and higher-rate tax

trenchwars

Say you're a higher-rate taxpayer who pays tax via PAYE and you earn a small amount of additional taxable interest on savings (around £500 P/A). The bank will deduct 20% tax from the interest so how do HMRC normally collect the other 20%?

Rolo_Tomasi

You have to notify the Revenue of the amount of interest you are likely to receive and they will then adjust your tax code so that the tax is collected through your wages.

trenchwars

So you would need to supply the Revenue with an estimate of how much interest you were going to earn for the 09/10 tax year before the 09/10 tax year ends.

Do they deduct the tax based on this estimate, or is it calculated from information provided by the banks to the Revenue?

System

You would be expected to provide the estimate yourself (usually based on the previous years investment income) and then advise HMRC of the actual figure so that they can repay any refund and adjust your code for the following year.

trenchwars

Okay thanks.