Tax underpayment - 40% interest

snezhinskproject

Hi,

I have been a 40% band taxpayer for 5 years, although virtually all of my income is simple employment income and taxed by PAYE, so I have never had to do a tax return (and I don't think I have ever been required to do one looking at HMRC's criteria).

I say virtually all - I have had a fair bit of savings earning interest. Obviously the ISA stuff is no problem, but the money I have had in normal bank accounts has only been taxed at 20%.

Therefore I now realise that I owe HMRC money, which I calculate at around £1,000 for the 5 years. Obviously I need to put this right, but my question is how to approach this with HMRC. Of course I don't want to get stung with penalties etc. for this, so if anyone knows a good way of dealing with it with HMRC I would be grateful to know.

Many thanks.

BobQ

I contacted them recently on a similar matter because they have not asked me to submit a self assessment form for a few years. They just calculated the tax due and said they would reclaim it from my employement earnings by adjusting the tax code for the next year. Mine was more than £1K. You also have the option of paying it there and then.

EDit -They have bigger fish to fry than you. There are people actively evading tax and creatively avoiding it on a much bigger scale. Unless they think you have been devious they will almost certainly give you the benefit of the doubt. The fact you tell them of the problem will almost certainly be enough to show your good faith. Suggest you just send them you figures.

System

Based on your figures I presume your taxed interest is around £1000 per year (give or take). As you say, you shouldn't need to complete Tax Returns in this scenario.

Based on what you've described it should be possible to settle the matter under their P800 tax calculation process. These are the normal end of year PAYE calculations. If this is the case there's no penalties or interest - they'll most likely collect the tax by adjusting next years tax code.

To get the ball rolling, just write to them with details of your interest (gross, net and tax paid) for each year involved. If you've more than one account they only need the total figures for each year rather than details of each individual account. You don't need to tell them about your ISA.

System

Going forward it's likely they will include an adjustment to collect any higher rate tax due on your saving through your PAYE. This will be based on an estimate of your interest. In your case they'll probably use your 2011-12 figures as the most uptodate details available.