Exceeding the Personal Savings Allowance

melbury

Just wondered about this, I have checked and went over the £1,000 allowance by circa £400 in the last tax year.  Do I have to notify HMRC or do the banks/building societies automatically inform them about savings interest?

With interest rates on the rise think I will have to start putting money into a cash ISA again.

diystarter7

You have to tell them. Otherwise, you may get a big shock when they demand the missed years' tax. Best to pay your taxes rather than tempted to spend it.

LeafGreen

diystarter7 said:

You have to tell them. Otherwise, you may get a big shock when they demand the missed years' tax. Best to pay your taxes rather than tempted to spend it.

This is incorrect.

https://www.gov.uk/apply-tax-free-interest-on-savings

ColdIron

diystarter7 said:

You have to tell them. Otherwise, you may get a big shock when they demand the missed years' tax. Best to pay your taxes rather than tempted to spend it.

You don't have to tell them. Banks report interest to HMRC who know your tax status and other income and will change your tax code to recoup any tax payable

diystarter7

ColdIron said:

diystarter7 said:

You have to tell them. Otherwise, you may get a big shock when they demand the missed years' tax. Best to pay your taxes rather than tempted to spend it.

You don't have to tell them. Banks report interest to HMRC who know your tax status and other income and will change your tax code to recoup any tax payable

Ok, thanks.

in_my_wellies

ColdIron said:

diystarter7 said:

You have to tell them. Otherwise, you may get a big shock when they demand the missed years' tax. Best to pay your taxes rather than tempted to spend it.

You don't have to tell them. Banks report interest to HMRC who know your tax status and other income and will change your tax code to recoup any tax payable

I've often wondered about this - even though it doesn't apply to me, I just wondered.  If the banks tell HMRC why is it necessary to tell them on the self assessment form. Why isn't it be automatic?

ColdIron

in_my_wellies said:

ColdIron said:

diystarter7 said:

You have to tell them. Otherwise, you may get a big shock when they demand the missed years' tax. Best to pay your taxes rather than tempted to spend it.

You don't have to tell them. Banks report interest to HMRC who know your tax status and other income and will change your tax code to recoup any tax payable

I've often wondered about this - even though it doesn't apply to me, I just wondered.  If the banks tell HMRC why is it necessary to tell them on the self assessment form. Why isn't it be automatic?

If you don't do Self Assessment because your affairs are simple then it is automatic for most people. If you do do Self Assessment already, because your affairs are more complex, then you need to declare everything

melbury

Thanks for all of the helpful replies. 

It is a relief to know that I won't have to sit on hold on the phone for ages trying to speak to someone at HMRC to tell them that I owe them about £80.

melbury

grahamgoo said:

diystarter7 said:

You have to tell them. Otherwise, you may get a big shock when they demand the missed years' tax. Best to pay your taxes rather than tempted to spend it.

This is incorrect.

https://www.gov.uk/apply-tax-free-interest-on-savings

I read that page earlier, but couldn't see anywhere that the banks/building societies provide the information direct to HMRC, just that it will be collected by adjusting the tax code, so wasn't certain.

eskbanker

melbury said:

I read that page earlier, but couldn't see anywhere that the banks/building societies provide the information direct to HMRC, just that it will be collected by adjusting the tax code, so wasn't certain.

https://www.gov.uk/guidance/bank-and-building-society-interest-returns

Background

HMRC requires UK banks and building societies to annually submit information about interest paid or credited to reportable persons.

This information is used to pre-populate customer tax accounts, it informs:

• the issue of PAYE notices of coding and tax calculations
• checks to make sure Self Assessment tax returns are accurate and complete

The following legislation gives HMRC the power to issue the notice requiring you to make a return:

• schedule 23 of the Finance Act 2011
• the Data-gathering Powers (Relevant Data) Regulations 2012 (regulations 5 to 10 inclusive cover the data HMRC can request)

HMRC will charge a penalty if you fail to comply with a notice to make a return.

Dazed_and_C0nfused

melbury said:

Thanks for all of the helpful replies. 

It is a relief to know that I won't have to sit on hold on the phone for ages trying to speak to someone at HMRC to tell them that I owe them about £80.

What normally happens is that you will get a tax calculation for 2021:22 later this year and the tax owed for 2021:22 will be collected by an adjustment to your 2023:24 tax code, starting in April 2023.

You will also receive a revised tax code for 2022:23 so you start paying extra tax for 2022:23 during the current tax year. 

HMRC usually assume you will receive the same interest as the previous year and then if any further adjustment is needed that will be resolved this time next year.  Or you can provide a more upto date estimate when you get the new tax code.

If the tax can't be collected via your tax code, for example you no longer have a PAYE source of income or you do but don't normally pay tax then HMRC will send you a Simple Assessment calculation instead of a P800 calculation and you will have to pay the tax owed for 2021:22 direct to HMRC by 31 January 2023.

Presumably you are aware of the savings starter rate band (upto £5,000 interest taxed at 0%) and your taxable wages/pension income means you can't benefit from it?