HMRC and calculation of tax on savings interest

Dazed_and_C0nfused

RG2015 said:

Dazed_and_C0nfused said:

RG2015 said:

Dazed_and_C0nfused said:

RG2015 said:

poppystar said:

Band7 said:

Have you checked in your Personal Tax account how much interest HMRC think you will get? If they have the wrong number, it's easy to adjust it to a better amount. 

Though it is also possible that they are still collecting tax due for 2021-22 as the banks don't report until well after the end of the tax year

Yes I did. I was hoping that might explain where the figure they are using came from. I expect, given interest rate rises during the year, that ultimately I will need to pay more tax for the year. It gave no information as to how they arrived at their estimated interest figure. And as I say it said £36 due and that the tax code adjustment would result in £28 tax being paid. 

The account showed all tax paid for 21/22 so it at least made it clear that this related to this year. 

This makes no sense. You cannot be taxed on the current tax year because no one will know how much interest you will earn before the year has ended.

You can pay tax towards the total due for this year though, either because HMRC have estimated the interest that will be received based on the previous tax year or because the person (or their agent/accountant) has provided their own figure of interest they expect to receive for the current tax year.

When the year is eventually reviewed the total tax paid during the year will be compared to the actual tax due and any difference (subject to the small(?) amounts HMRC ignore) will have to be paid or if a refund is due it will be refunded by HMRC.

Okay, but it cannot be the OP or their accountant as they would know.

It cannot be based on 2021:2022 because the OP's PTA says the correct amount of tax has been paid for this year.

This leaves 2020:2021 as the year upon which any estimate could be based which seems unlikely.

Whatever has happened there does appear to be something rotten in the State of Denmark HMRC. 

I think you're getting confused.

The 2021:22 tax year could easily be "correct" in the sense that the op owes say £20 and HMRC have decided not to collect that.

But that wouldn't stop them from using the 2021:22 information to update the 2022:23 tax year.

And the revised tax code for 2022:23 is only looking to get 2022:23 as accurate as possible.

Not so much confused as dazed ignorant.

It had never occurred to me that HMRC could deem an amount too small to collect for one year and then make an adjustment to collect a similar amount in the following year. And this before that following year has even ended.

It just seems to be an illogical and unnecessary move for what they have already determined is a small amount.

Hopefully the OP will come back and update us in due course.

What's illogical to one is logical to another I guess.

I think the basic principle is they try to keep the current years tax code upto date to minimise the number of people who need a calculation after the tax year ends.

RG2015

poppystar said:

RG2015 said:

Dazed_and_C0nfused said:

RG2015 said:

poppystar said:

Band7 said:

Have you checked in your Personal Tax account how much interest HMRC think you will get? If they have the wrong number, it's easy to adjust it to a better amount. 

Though it is also possible that they are still collecting tax due for 2021-22 as the banks don't report until well after the end of the tax year

Yes I did. I was hoping that might explain where the figure they are using came from. I expect, given interest rate rises during the year, that ultimately I will need to pay more tax for the year. It gave no information as to how they arrived at their estimated interest figure. And as I say it said £36 due and that the tax code adjustment would result in £28 tax being paid. 

The account showed all tax paid for 21/22 so it at least made it clear that this related to this year. 

This makes no sense. You cannot be taxed on the current tax year because no one will know how much interest you will earn before the year has ended.

You can pay tax towards the total due for this year though, either because HMRC have estimated the interest that will be received based on the previous tax year or because the person (or their agent/accountant) has provided their own figure of interest they expect to receive for the current tax year.

When the year is eventually reviewed the total tax paid during the year will be compared to the actual tax due and any difference (subject to the small(?) amounts HMRC ignore) will have to be paid or if a refund is due it will be refunded by HMRC.

Okay, but it cannot be the OP or their accountant as they would know.

It cannot be based on 2021:2022 because the OP's PTA says the correct amount of tax has been paid for this year.

This leaves 2020:2021 as the year upon which any estimate could be based which seems unlikely.

Whatever has happened there does appear to be something rotten in the State of Denmark HMRC. 

It’s certainly not 20/21 as that also says all tax paid and I definitely earned nowhere near enough interest in that year to need to pay tax. 

It seems they must have made some sort of guesstimate rather than estimate for this year - which is why I logged into my account in the hope it would tell me on what that was based. It gives their figure but no idea of where they got it from? Is it likely one financial institution has already sent in details of some interest paid this year to date? 

Did you earn enough interest in 2021:2022 to have to pay tax.

RG2015

Dazed_and_C0nfused said:

RG2015 said:

Dazed_and_C0nfused said:

RG2015 said:

Dazed_and_C0nfused said:

RG2015 said:

poppystar said:

Band7 said:

Have you checked in your Personal Tax account how much interest HMRC think you will get? If they have the wrong number, it's easy to adjust it to a better amount. 

Though it is also possible that they are still collecting tax due for 2021-22 as the banks don't report until well after the end of the tax year

Yes I did. I was hoping that might explain where the figure they are using came from. I expect, given interest rate rises during the year, that ultimately I will need to pay more tax for the year. It gave no information as to how they arrived at their estimated interest figure. And as I say it said £36 due and that the tax code adjustment would result in £28 tax being paid. 

The account showed all tax paid for 21/22 so it at least made it clear that this related to this year. 

This makes no sense. You cannot be taxed on the current tax year because no one will know how much interest you will earn before the year has ended.

You can pay tax towards the total due for this year though, either because HMRC have estimated the interest that will be received based on the previous tax year or because the person (or their agent/accountant) has provided their own figure of interest they expect to receive for the current tax year.

When the year is eventually reviewed the total tax paid during the year will be compared to the actual tax due and any difference (subject to the small(?) amounts HMRC ignore) will have to be paid or if a refund is due it will be refunded by HMRC.

Okay, but it cannot be the OP or their accountant as they would know.

It cannot be based on 2021:2022 because the OP's PTA says the correct amount of tax has been paid for this year.

This leaves 2020:2021 as the year upon which any estimate could be based which seems unlikely.

Whatever has happened there does appear to be something rotten in the State of Denmark HMRC. 

I think you're getting confused.

The 2021:22 tax year could easily be "correct" in the sense that the op owes say £20 and HMRC have decided not to collect that.

But that wouldn't stop them from using the 2021:22 information to update the 2022:23 tax year.

And the revised tax code for 2022:23 is only looking to get 2022:23 as accurate as possible.

Not so much confused as dazed ignorant.

It had never occurred to me that HMRC could deem an amount too small to collect for one year and then make an adjustment to collect a similar amount in the following year. And this before that following year has even ended.

It just seems to be an illogical and unnecessary move for what they have already determined is a small amount.

Hopefully the OP will come back and update us in due course.

What's illogical to one is logical to another I guess.

I think the basic principle is they try to keep the current years tax code upto date to minimise the number of people who need a calculation after the tax year ends.

Hmm.

My logic says that guessing a possible tax liability is a strange way to attempt to avoid a retrospective calculation

poppystar

Dazed_and_C0nfused said:

RG2015 said:

Dazed_and_C0nfused said:

RG2015 said:

Dazed_and_C0nfused said:

RG2015 said:

poppystar said:

Band7 said:

Have you checked in your Personal Tax account how much interest HMRC think you will get? If they have the wrong number, it's easy to adjust it to a better amount. 

Though it is also possible that they are still collecting tax due for 2021-22 as the banks don't report until well after the end of the tax year

Yes I did. I was hoping that might explain where the figure they are using came from. I expect, given interest rate rises during the year, that ultimately I will need to pay more tax for the year. It gave no information as to how they arrived at their estimated interest figure. And as I say it said £36 due and that the tax code adjustment would result in £28 tax being paid. 

The account showed all tax paid for 21/22 so it at least made it clear that this related to this year. 

This makes no sense. You cannot be taxed on the current tax year because no one will know how much interest you will earn before the year has ended.

You can pay tax towards the total due for this year though, either because HMRC have estimated the interest that will be received based on the previous tax year or because the person (or their agent/accountant) has provided their own figure of interest they expect to receive for the current tax year.

When the year is eventually reviewed the total tax paid during the year will be compared to the actual tax due and any difference (subject to the small(?) amounts HMRC ignore) will have to be paid or if a refund is due it will be refunded by HMRC.

Okay, but it cannot be the OP or their accountant as they would know.

It cannot be based on 2021:2022 because the OP's PTA says the correct amount of tax has been paid for this year.

This leaves 2020:2021 as the year upon which any estimate could be based which seems unlikely.

Whatever has happened there does appear to be something rotten in the State of Denmark HMRC. 

I think you're getting confused.

The 2021:22 tax year could easily be "correct" in the sense that the op owes say £20 and HMRC have decided not to collect that.

But that wouldn't stop them from using the 2021:22 information to update the 2022:23 tax year.

And the revised tax code for 2022:23 is only looking to get 2022:23 as accurate as possible.

Not so much confused as dazed ignorant.

It had never occurred to me that HMRC could deem an amount too small to collect for one year and then make an adjustment to collect a similar amount in the following year. And this before that following year has even ended.

It just seems to be an illogical and unnecessary move for what they have already determined is a small amount.

Hopefully the OP will come back and update us in due course.

What's illogical to one is logical to another I guess.

I think the basic principle is they try to keep the current years tax code upto date to minimise the number of people who need a calculation after the tax year ends.

But surely they are aware that interest rates have at least doubled so it’s highly likely that more interest would be earned this year than last so a calculation after the tax year ends is inevitable? 

Dazed_and_C0nfused

RG2015 said:

Dazed_and_C0nfused said:

RG2015 said:

Dazed_and_C0nfused said:

RG2015 said:

Dazed_and_C0nfused said:

RG2015 said:

poppystar said:

Band7 said:

Have you checked in your Personal Tax account how much interest HMRC think you will get? If they have the wrong number, it's easy to adjust it to a better amount. 

Though it is also possible that they are still collecting tax due for 2021-22 as the banks don't report until well after the end of the tax year

Yes I did. I was hoping that might explain where the figure they are using came from. I expect, given interest rate rises during the year, that ultimately I will need to pay more tax for the year. It gave no information as to how they arrived at their estimated interest figure. And as I say it said £36 due and that the tax code adjustment would result in £28 tax being paid. 

The account showed all tax paid for 21/22 so it at least made it clear that this related to this year. 

This makes no sense. You cannot be taxed on the current tax year because no one will know how much interest you will earn before the year has ended.

You can pay tax towards the total due for this year though, either because HMRC have estimated the interest that will be received based on the previous tax year or because the person (or their agent/accountant) has provided their own figure of interest they expect to receive for the current tax year.

When the year is eventually reviewed the total tax paid during the year will be compared to the actual tax due and any difference (subject to the small(?) amounts HMRC ignore) will have to be paid or if a refund is due it will be refunded by HMRC.

Okay, but it cannot be the OP or their accountant as they would know.

It cannot be based on 2021:2022 because the OP's PTA says the correct amount of tax has been paid for this year.

This leaves 2020:2021 as the year upon which any estimate could be based which seems unlikely.

Whatever has happened there does appear to be something rotten in the State of Denmark HMRC. 

I think you're getting confused.

The 2021:22 tax year could easily be "correct" in the sense that the op owes say £20 and HMRC have decided not to collect that.

But that wouldn't stop them from using the 2021:22 information to update the 2022:23 tax year.

And the revised tax code for 2022:23 is only looking to get 2022:23 as accurate as possible.

Not so much confused as dazed ignorant.

It had never occurred to me that HMRC could deem an amount too small to collect for one year and then make an adjustment to collect a similar amount in the following year. And this before that following year has even ended.

It just seems to be an illogical and unnecessary move for what they have already determined is a small amount.

Hopefully the OP will come back and update us in due course.

What's illogical to one is logical to another I guess.

I think the basic principle is they try to keep the current years tax code upto date to minimise the number of people who need a calculation after the tax year ends.

Hmm.

My logic says that guessing a possible tax liability is a strange way to attempt to avoid a retrospective calculation

That is how PAYE works!

Earnings, pension contributions, gift aid, interest, company benefits are all estimated during the year.

RG2015

Dazed_and_C0nfused said:

RG2015 said:

Dazed_and_C0nfused said:

RG2015 said:

Dazed_and_C0nfused said:

RG2015 said:

Dazed_and_C0nfused said:

RG2015 said:

poppystar said:

Band7 said:

Have you checked in your Personal Tax account how much interest HMRC think you will get? If they have the wrong number, it's easy to adjust it to a better amount. 

Though it is also possible that they are still collecting tax due for 2021-22 as the banks don't report until well after the end of the tax year

Yes I did. I was hoping that might explain where the figure they are using came from. I expect, given interest rate rises during the year, that ultimately I will need to pay more tax for the year. It gave no information as to how they arrived at their estimated interest figure. And as I say it said £36 due and that the tax code adjustment would result in £28 tax being paid. 

The account showed all tax paid for 21/22 so it at least made it clear that this related to this year. 

This makes no sense. You cannot be taxed on the current tax year because no one will know how much interest you will earn before the year has ended.

You can pay tax towards the total due for this year though, either because HMRC have estimated the interest that will be received based on the previous tax year or because the person (or their agent/accountant) has provided their own figure of interest they expect to receive for the current tax year.

When the year is eventually reviewed the total tax paid during the year will be compared to the actual tax due and any difference (subject to the small(?) amounts HMRC ignore) will have to be paid or if a refund is due it will be refunded by HMRC.

Okay, but it cannot be the OP or their accountant as they would know.

It cannot be based on 2021:2022 because the OP's PTA says the correct amount of tax has been paid for this year.

This leaves 2020:2021 as the year upon which any estimate could be based which seems unlikely.

Whatever has happened there does appear to be something rotten in the State of Denmark HMRC. 

I think you're getting confused.

The 2021:22 tax year could easily be "correct" in the sense that the op owes say £20 and HMRC have decided not to collect that.

But that wouldn't stop them from using the 2021:22 information to update the 2022:23 tax year.

And the revised tax code for 2022:23 is only looking to get 2022:23 as accurate as possible.

Not so much confused as dazed ignorant.

It had never occurred to me that HMRC could deem an amount too small to collect for one year and then make an adjustment to collect a similar amount in the following year. And this before that following year has even ended.

It just seems to be an illogical and unnecessary move for what they have already determined is a small amount.

Hopefully the OP will come back and update us in due course.

What's illogical to one is logical to another I guess.

I think the basic principle is they try to keep the current years tax code upto date to minimise the number of people who need a calculation after the tax year ends.

Hmm.

My logic says that guessing a possible tax liability is a strange way to attempt to avoid a retrospective calculation

That is how PAYE works!

Earnings, pension contributions, gift aid, interest, company benefits are all estimated during the year.

So it is.

I stand corrected, and this is very useful to know for the next time I have any issues with HMRC. 

poppystar

RG2015 said:

poppystar said:

RG2015 said:

Dazed_and_C0nfused said:

RG2015 said:

poppystar said:

Band7 said:

Have you checked in your Personal Tax account how much interest HMRC think you will get? If they have the wrong number, it's easy to adjust it to a better amount. 

Though it is also possible that they are still collecting tax due for 2021-22 as the banks don't report until well after the end of the tax year

Yes I did. I was hoping that might explain where the figure they are using came from. I expect, given interest rate rises during the year, that ultimately I will need to pay more tax for the year. It gave no information as to how they arrived at their estimated interest figure. And as I say it said £36 due and that the tax code adjustment would result in £28 tax being paid. 

The account showed all tax paid for 21/22 so it at least made it clear that this related to this year. 

This makes no sense. You cannot be taxed on the current tax year because no one will know how much interest you will earn before the year has ended.

You can pay tax towards the total due for this year though, either because HMRC have estimated the interest that will be received based on the previous tax year or because the person (or their agent/accountant) has provided their own figure of interest they expect to receive for the current tax year.

When the year is eventually reviewed the total tax paid during the year will be compared to the actual tax due and any difference (subject to the small(?) amounts HMRC ignore) will have to be paid or if a refund is due it will be refunded by HMRC.

Okay, but it cannot be the OP or their accountant as they would know.

It cannot be based on 2021:2022 because the OP's PTA says the correct amount of tax has been paid for this year.

This leaves 2020:2021 as the year upon which any estimate could be based which seems unlikely.

Whatever has happened there does appear to be something rotten in the State of Denmark HMRC. 

It’s certainly not 20/21 as that also says all tax paid and I definitely earned nowhere near enough interest in that year to need to pay tax. 

It seems they must have made some sort of guesstimate rather than estimate for this year - which is why I logged into my account in the hope it would tell me on what that was based. It gives their figure but no idea of where they got it from? Is it likely one financial institution has already sent in details of some interest paid this year to date? 

Did you earn enough interest in 2021:2022 to have to pay tax.

Borderline - hence my asking how they treated annual and monthly interest so I could calculate it myself. 

RG2015

poppystar said:

RG2015 said:

poppystar said:

RG2015 said:

Dazed_and_C0nfused said:

RG2015 said:

poppystar said:

Band7 said:

Have you checked in your Personal Tax account how much interest HMRC think you will get? If they have the wrong number, it's easy to adjust it to a better amount. 

Though it is also possible that they are still collecting tax due for 2021-22 as the banks don't report until well after the end of the tax year

Yes I did. I was hoping that might explain where the figure they are using came from. I expect, given interest rate rises during the year, that ultimately I will need to pay more tax for the year. It gave no information as to how they arrived at their estimated interest figure. And as I say it said £36 due and that the tax code adjustment would result in £28 tax being paid. 

The account showed all tax paid for 21/22 so it at least made it clear that this related to this year. 

This makes no sense. You cannot be taxed on the current tax year because no one will know how much interest you will earn before the year has ended.

You can pay tax towards the total due for this year though, either because HMRC have estimated the interest that will be received based on the previous tax year or because the person (or their agent/accountant) has provided their own figure of interest they expect to receive for the current tax year.

When the year is eventually reviewed the total tax paid during the year will be compared to the actual tax due and any difference (subject to the small(?) amounts HMRC ignore) will have to be paid or if a refund is due it will be refunded by HMRC.

Okay, but it cannot be the OP or their accountant as they would know.

It cannot be based on 2021:2022 because the OP's PTA says the correct amount of tax has been paid for this year.

This leaves 2020:2021 as the year upon which any estimate could be based which seems unlikely.

Whatever has happened there does appear to be something rotten in the State of Denmark HMRC. 

It’s certainly not 20/21 as that also says all tax paid and I definitely earned nowhere near enough interest in that year to need to pay tax. 

It seems they must have made some sort of guesstimate rather than estimate for this year - which is why I logged into my account in the hope it would tell me on what that was based. It gives their figure but no idea of where they got it from? Is it likely one financial institution has already sent in details of some interest paid this year to date? 

Did you earn enough interest in 2021:2022 to have to pay tax.

Borderline - hence my asking how they treated annual and monthly interest so I could calculate it myself. 

Tax is payable on payments made during the tax year. Hence an annual interest payment made on 6th April 2022 would be taxable in the year 2022:2023.

This despite the fact that 364 days of this related to the previous year.

For fixed accounts more than one year in duration the year in which tax is due is less clear. Generally the test is in which tax year the interest becomes available.

This can in some cases mean that two or more years worth of interest can be taxable in the same year. 

RG2015

PS: As @Dazed_and_C0nfused said it does depend when the savings provider reports the interest to HMRC.

poppystar

RG2015 said:o

poppystar said:

RG2015 said:

poppystar said:

RG2015 said:

Dazed_and_C0nfused said:

RG2015 said:

poppystar said:

Band7 said:

Have you checked in your Personal Tax account how much interest HMRC think you will get? If they have the wrong number, it's easy to adjust it to a better amount. 

Though it is also possible that they are still collecting tax due for 2021-22 as the banks don't report until well after the end of the tax year

Yes I did. I was hoping that might explain where the figure they are using came from. I expect, given interest rate rises during the year, that ultimately I will need to pay more tax for the year. It gave no information as to how they arrived at their estimated interest figure. And as I say it said £36 due and that the tax code adjustment would result in £28 tax being paid. 

The account showed all tax paid for 21/22 so it at least made it clear that this related to this year. 

This makes no sense. You cannot be taxed on the current tax year because no one will know how much interest you will earn before the year has ended.

You can pay tax towards the total due for this year though, either because HMRC have estimated the interest that will be received based on the previous tax year or because the person (or their agent/accountant) has provided their own figure of interest they expect to receive for the current tax year.

When the year is eventually reviewed the total tax paid during the year will be compared to the actual tax due and any difference (subject to the small(?) amounts HMRC ignore) will have to be paid or if a refund is due it will be refunded by HMRC.

Okay, but it cannot be the OP or their accountant as they would know.

It cannot be based on 2021:2022 because the OP's PTA says the correct amount of tax has been paid for this year.

This leaves 2020:2021 as the year upon which any estimate could be based which seems unlikely.

Whatever has happened there does appear to be something rotten in the State of Denmark HMRC. 

It’s certainly not 20/21 as that also says all tax paid and I definitely earned nowhere near enough interest in that year to need to pay tax. 

It seems they must have made some sort of guesstimate rather than estimate for this year - which is why I logged into my account in the hope it would tell me on what that was based. It gives their figure but no idea of where they got it from? Is it likely one financial institution has already sent in details of some interest paid this year to date? 

Did you earn enough interest in 2021:2022 to have to pay tax.

Borderline - hence my asking how they treated annual and monthly interest so I could calculate it myself. 

Tax is payable on payments made during the tax year. Hence an annual interest payment made on 6th April 2022 would be taxable in the year 2022:2023.

This despite the fact that 364 days of this related to the previous year.

For fixed accounts more than one year in duration the year in which tax is due is less clear. Generally the test is in which tax year the interest becomes available.

This can in some cases mean that two or more years worth of interest can be taxable in the same year. 

Thanks, that’s very helpful. I hadn’t even thought about the situation in relation to accounts fixed for more than one year.