HMRC Savings Interest Letter

[Deleted User]

I've received a letter/form in the post this week from HMRC saying that their records show that I have untaxed interest for the 2020 to 2021 tax year. They want me to fill out the form listing all my bank accounts and how much interest I received from them in the 2020/21 tax year.

I understand that you can have £1000 of interest per year before being taxed on it - there is no way on earth did I receive anywhere near this amount of interest, I can only wish!

Are these just random letters sent out or do they really think I've had a load of undeclared interest?

My tax affairs are simple, basic rate tax payer via PAYE. 

Dazed_and_C0nfused

Unless it's in an ISA or some NS&I accounts virtually all other interest is taxable, there is no £1,000 exemption.

But you don't pay tax on it until you have used your Personal Allowance, savings starter rate (upto £5,000 taxed at 0%) and savings nil rate (upto £1,000 taxed at 0%).

Even when taxed at 0% having taxable interest can increase your overall tax/HICBC liability as it forms part of your adjusted net income.

Which part of HMRC sent you the letter?

Thumbs_Up

I’ll be waiting for my letter then, over 6k interest for me. Thanks for the notice.

Dazed_and_C0nfused

Thumbs_Up said:

I’ll be waiting for my letter then, over 6k interest for me. Thanks for the notice.

Why do you think you'll get a letter like that?

Thumbs_Up

Unless the banks notify HMRC.

[Deleted User]

Dazed_and_C0nfused said:

Unless it's in an ISA or some NS&I accounts virtually all other interest is taxable, there is no £1,000 exemption.

But you don't pay tax on it until you have used your Personal Allowance, savings starter rate (upto £5,000 taxed at 0%) and savings nil rate (upto £1,000 taxed at 0%).

Even when taxed at 0% having taxable interest can increase your overall tax/HICBC liability as it forms part of your adjusted net income.

Which part of HMRC sent you the letter?

I think you knew what I meant. There is no way I maxed out my £1000 personal allowance. I don't have an ISA and I only have £50 of premium bonds.

Heading on the letter says 'Bank and Building Society Interest (BBSI)' and the address is 'Pay As You Earn and Self Assessment BX9 1AS' 

refluxer

Deleted_User said:

There is no way I maxed out my £1000 personal allowance. I don't have an ISA and I only have £50 of premium bonds.

That's odd because I would have thought they would send out a letter like that based on what the banks and building societies have told them they've paid out to you. It could be a simple mistake though, I guess.

There is a useful list here which spells out what the PSA applies to, just in case you've overlooked anything...

Your allowance applies to interest from:

• bank and building society accounts
• savings and credit union accounts
• unit trusts, investment trusts and open-ended investment companies
• peer-to-peer lending
• trust funds
• payment protection insurance (PPI)
• government or company bonds
• life annuity payments
• some life insurance contracts

ranciduk

Does your allowance include any money you receive via dividends from shares you own?

labp04

Maybe give 'em a call Income Tax: general enquiries - GOV.UK (www.gov.uk)

Dazed_and_C0nfused

ranciduk said:

Does your allowance include any money you receive via dividends from shares you own?

Your Personal Allowance can be used by dividend income.

And £2,000 is taxed at 0% (dividend nil rate aka dividend allowance).

ranciduk

Dazed_and_C0nfused said:

ranciduk said:

Does your allowance include any money you receive via dividends from shares you own?

And £2,000 is taxed at 0% (dividend nil rate aka dividend allowance).

Sso you only get taxed on dividends if they total over £2k ?