HMRC and calculation of tax on savings interest

Band7

poppystar 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.

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? 

It's only highly likely that more interest will be earned if the savings continue to be on approximately the same level, and are in accounts which earn higher rate(s) of interest. But yes, they should be doing a reconciliation once they know how much you actually received. It's a bit of an intransparent mess as they don't even freely share with you how they arrive at the amount they tax you on. You have to ask for the details. And wait until you actually get them. 

RG2015

Band7 said:

poppystar 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.

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? 

It's only highly likely that more interest will be earned if the savings continue to be on approximately the same level, and are in accounts which earn higher rate(s) of interest. But yes, they should be doing a reconciliation once they know how much you actually received. It's a bit of an intransparent mess as they don't even freely share with you how they arrive at the amount they tax you on. You have to ask for the details. And wait until you actually get them. 

I have always found HMRC telephone staff very helpful. They give me all the figures over the phone and change them if I give them more accurate figures.

If you are calling them, 08:00 Tuesday to Thursday is the best time to avoid lengthy delays in getting to speak to someone.

I have waited over 30 minutes when calling later in the day but last time I rang at 08:00 I was speaking to someone within 5 minutes.

poppystar

Band7 said:

poppystar 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.

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? 

It's only highly likely that more interest will be earned if the savings continue to be on approximately the same level, and are in accounts which earn higher rate(s) of interest. But yes, they should be doing a reconciliation once they know how much you actually received. It's a bit of an intransparent mess as they don't even freely share with you how they arrive at the amount they tax you on. You have to ask for the details. And wait until you actually get them. 

Yes, I was a bit shocked when I logged in to my account and found such little information. I could understand why they didn’t put details in the letter but expected to be able to see more than just the total figure when I logged in. If you have to phone to find the detail this seems a bit clunky given they must have the figures anyway so why not make it available online rather than just a summary - would save on the number of calls they have to take. 

Band7

RG2015 said:

Band7 said:

poppystar 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.

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? 

It's only highly likely that more interest will be earned if the savings continue to be on approximately the same level, and are in accounts which earn higher rate(s) of interest. But yes, they should be doing a reconciliation once they know how much you actually received. It's a bit of an intransparent mess as they don't even freely share with you how they arrive at the amount they tax you on. You have to ask for the details. And wait until you actually get them. 

I have always found HMRC telephone staff very helpful. They give me all the figures over the phone and change them if I give them more accurate figures.

If you are calling them, 08:00 Tuesday to Thursday is the best time to avoid lengthy delays in getting to speak to someone.

I have waited over 30 minutes when calling later in the day but last time I rang at 08:00 I was speaking to someone within 5 minutes.

I know. They are very good on the phone. Don't forget to sharpen your quill, and have plenty of ink to note down the long list of numbers that make up the interest they are taxing you on.

Imagine computers and the Internet had been invented, then millions of savers could look up at any time of any day what they are being taxed on, and wouldn't need to beat each other to speaking to a poor sod in the HMRC who has to get up at 5 am to be at their desk for the 8am calls.

poppystar

….except of course these days the poor sod at the end of the phone is probably at home in his pyjamas, warming himself in front of the fire as his children eat their breakfast, with his own laptop open in front of him giving him online access to the information you need to then scribble down madly … 

Qyburn

RG2015 said:

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.

They actually did something similar for the missus, in 2020/21 tax year her interest exceeded the £1000. They have not asked for anything to be paid for that tax year, but made an adjustment to her code 2021/22 in anticipation of it continuing. Then in Nov 2022 they sent a refund as interest ended up less than they predicted.

RG2015

Qyburn said:

SoRG2015 said:

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.

They actually did something similar for the missus, in 2020/21 tax year her interest exceeded the £1000. They have not asked for anything to be paid for that tax year, but made an adjustment to her code 2021/22 in anticipation of it continuing. Then in Nov 2022 they sent a refund as interest ended up less than they predicted.

So my logic says wait and see and HMRC try to guess in the hope that they guess correctly.

Reed_Richards

Before I retired I was self-employed.  Originally I paid income tax in arrears but then HMRC changed the system so we self-employed were asked to pay tax on the current year.  The tax due was based on the tax return for the previous year on the assumption that you were earning the same in the current year.  You could appeal the amount if you had undergone a big change in circumstances.  But you can indeed be taxed on the current year, despite the fact that nobody knows how much you will earn. 

RG2015

Reed_Richards said:

Before I retired I was self-employed.  Originally I paid income tax in arrears but then HMRC changed the system so we self-employed were asked to pay tax on the current year.  The tax due was based on the tax return for the previous year on the assumption that you were earning the same in the current year.  You could appeal the amount if you had undergone a big change in circumstances.  But you can indeed be taxed on the current year, despite the fact that nobody knows how much you will earn. 

I agree, however my view is that interest income is different.

I am though close to changing my view.

J63320

Qyburn said:

They actually did something similar for the missus, in 2020/21 tax year her interest exceeded the £1000. They have not asked for anything to be paid for that tax year, but made an adjustment to her code 2021/22 in anticipation of it continuing. Then in Nov 2022 they sent a refund as interest ended up less than they predicted.

I have, in my current tax code, an adjustment for untaxed income. I assume it’s because, having downsized in March 2021, I had over £300,000 in a savings account at tax year end. I moved a lot of it into investments, and I’ve spent some on improving my new home, but HMRC seem to  think it’s still there and earning interest. In fact, I earned less than £1000 in 2021-22, and, because of the timing of interest capitalisation on my accounts, will earn less than £1000 this year despite the recent rate rises.
They’ve still not finalised my tax for 2020-21. The other day I received a Coding Notice for 2023-4 and it still has the adjustment for untaxed income.