Underpaid tax for bank interest

nmbash

Hi,
Until I got made redundant in Dec 2007 I used to work for a bank, so I had to declare all interests, benefits etc, which I did annually.
The tax man wrote to me recently saying I have 'underpaid tax on bank interest' for tax year 07/08.

I always declare everything since for me it is not worth the sleepless nights. I don't know what they are refering to and when I phoned to ask, they will not tell me what 'interest' they are refering to.

In Jan 2008, I did have a 'tidy up' and I did close a lot of accounts which had small amounts in them. I do have a couple of ISA accounts. One of them was an ICESAVE account which I put into another ISA account.
I'm assuming the interest on this is 'tax free' and don't have to be declared? Is that correct?

Lokolo

That is correct.

I would not pay a thing until they tell you exactly the amount and why.

Cook_County

Have you got a copy of your tax return? Did that show a balance due? Can you check online?

Is it higher rate tax on bank interest?

Hoddie_2

It potentially might be tax due and related interest on an ISA that was declared void? I've never seen this myself but it's theoretically possible if you made deposits into two different ISAs in one tax year without transferring the whole balance from one to another. If you just changed provider then you're okay, but if you had 2 seperate ones into which you made at least one deposit during the same year, this might the issue. But yes, they should be able to explain. Call again and ask for the call to be escalated if it's not explained.

trevormax

Were you a higher rate tax payer at the time?

If so then any interest earned from a regular bank account (i.e. not an ISA) would result in underpaid tax for that interest as banks only charge basic rate tax on interest.

orangeslimes

Is it possible there is some interest you might have forgotten about. e.g. if you emptied an account in Jan 08 you could still have received accrued interest in March or April? You could contact all the banks you held accounts with and ask for end of year tax certificates to check?
Also double check what figure HMRC have for your interest is what you think you put (especially if you filled in form by hand)