HMRC Savings Interest Letter

[Deleted User]

I have a few savings accounts and a few current accounts. My total interest from them in the 2020/21 tax year is way less than £1000. I don't have any shares, unit trusts, or anything like that apart from £50 in premium bonds. No idea why they seem to think I have had a pile of cash undeclared.

I did receive some PPI pay outs in 2020 but they were taxed by the company I used to get the payouts for me. I still have the invoices showing this also.   

RG2015

I have never received a letter like this, but I have on a number of occasions had my tax code increase to recover unpaid tax on interest received. The answer is usually quite simple and demonstrates the flaws in the HMRC process here.

Banks and building societies report interest received to HMRC in July and August, but this relates to 2021/2022 not 2020/2021. That said, HMRC may well be catching up on previous years in your case.

The problem lies in their assumption that any interest received in one tax year, is also received at the same level in subsequent years.

I have challenged them on this and they have said that banks also report where zero interest has been received on previously reported accounts. Hence there should be no erroneous carried forward amounts.

I have in the past asked for, and received a full list from HMRC of what they have included in any tax year. This proved to be that they were including actual amounts from previous years as estimates for subsequent years.

I have to say that with them questioning 2020/2021, you would be best advised to comply with their request. I am also surprised that you have not have any PAYE tax code adjustments for any of 2020/2021, 2021/2022 0r 2022/2023.

I am assuming that you have checked out all of the information on your personal tax account online. If not, see the link below.

https://www.gov.uk/personal-tax-account/prove-identity

Olinda99

Just fill out the form as requested and return to them

Should be easy as you only have £50 of premium bonds and prizes are tax free anyway.

refluxer

ranciduk said:

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

If your other earnings take you over the standard personal allowance of £12,570, then income up to £2000 from share dividends is taxed at zero percent and dividend income above £2000 is taxed at the appropriate rate.

If you earn less than £12,570, then you can potentially use the difference towards your dividend income, if appropriate.

Hope I've got that right !

refluxer

Deleted_User said:

I did receive some PPI pay outs in 2020 but they were taxed by the company I used to get the payouts for me. I still have the invoices showing this also.   

This seems like the most likely cause from what you've said so far. That deduction was definitely tax (and paid to HMRC) and not just their commission/fee ?

RG2015

Deleted_User said:

I have a few savings accounts and a few current accounts. My total interest from them in the 2020/21 tax year is way less than £1000. I don't have any shares, unit trusts, or anything like that apart from £50 in premium bonds. No idea why they seem to think I have had a pile of cash undeclared.

I did receive some PPI pay outs in 2020 but they were taxed by the company I used to get the payouts for me. I still have the invoices showing this also.   

I assume this refers to tax on the interest received on the amount awarded for the period from inception to the payout.

https://www.taxrebateservices.co.uk/ppi-and-paying-tax-on-your-refund

Dazed_and_C0nfused

Deleted_User said:

I have a few savings accounts and a few current accounts. My total interest from them in the 2020/21 tax year is way less than £1000. I don't have any shares, unit trusts, or anything like that apart from £50 in premium bonds. No idea why they seem to think I have had a pile of cash undeclared.

I did receive some PPI pay outs in 2020 but they were taxed by the company I used to get the payouts for me. I still have the invoices showing this also.   

Have you (or a third party) tried to claim the excess tax deducted back from HMRC?

As you are aware that £1,000 of interest is taxed at 0% and your normal interest was "way less" than £1,000 then you have some of the statutory interest paid alongside the PPI refunds which can be taxed at 0%.

Meaning some of the 20% tax will have been overpaid.

The above is assuming that the PPI payouts were in the 2020:21 tax year and not the 2019:20 tax year.

It's not unusual for third parties to claim this tax back without people who got the PPI refunds seemingly realising they have someone dealing with their tax refunds!  And keeping a cut

ranciduk

If you were to stop working completely, ie early retirement - how much interest could you get before you are taxed on some of it?

Dazed_and_C0nfused

ranciduk said:

If you were to stop working completely, ie early retirement - how much interest could you get before you are taxed on some of it?

In a tax year with no earnings or pension income (or rental income, business profits etc) then it is either £11,310 (Marriage Allowance applicant) or £12,570.

Then the next £6,000 will be taxed at 0%.

So £17,310 of £18,570 before tax is actually payable on it.

RG2015

ranciduk said:

If you were to stop working completely, ie early retirement - how much interest could you get before you are taxed on some of it?

Is this anything to do with the OP’s issue?

If not, it is rather disrespectful to hijack their thread.