How does HMRC know our savings amounts?

freeguy1984uk

Hi people,

How exactly does HMRC know if someone is earning over £1000 savings interest in a year?

I mean the Personal Savings Allowance.

I'm struggling to find the answer online.

I'm near to earning that much, and just can't figure out how HMRC would know that?

I can see they change your tax code for work to get their cut, but can't see how they know...

Thanks.

Kim_13

The providers will submit a report saying that they have paid X in interest to you. I can’t think of a bank or building society that doesn’t have my NI number, the PSA likely being why they now ask for it rather than only asking for it if you are applying to open an ISA. HMRC will compare that amount against any tax free allowance or PSA available to the individual with that NI number (whether £1,000, £500 or nil) to work out how much tax if any they need to recover.

If you are close to the limit or will pay tax, it’s worth checking the figures the bank give to ensure that you do not overpay due to an error in the information HMRC hold.

Ayr_Rage

The providers who pay you interest report it to HMRC, just like your employer does with your salary.

Barkin

Banks, building societies etc report it to HMRC. 

n3ophyte

The organisations you save with and earn interest from report that interest to HMRC.

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

Brie

How can they report it if they don't have your NI?  I've never been asked for mine for opening an account.

Sea_Shell

Ayr_Rage said:

The providers who pay you interest report it to HMRC, just like you employer does with your salary.

Unless you have accounts with a platform or aggregator (eg Raisin).  They don't report, apparently.

Dazed_and_C0nfused

Brie said:

How can they report it if they don't have your NI?  I've never been asked for mine for opening an account.

Oddly the NINO is required for an ISA but not for a non ISA account.

HMRC must have someway of matching the data the banks report with each person's tax record as on the whole it seems reasonably accurate.

Aminatidi

And how do they collect tax on savings interest?

So say I open a savings account with X and deposit enough to make £1100 interest over a year and I'm paid interest monthly.

That's over my £1000 PSA so as a regular PAYE employee on tax code 1257L.

What happens next?

masonic

Some savings banks do ask for NI number, but all financial institutions must collect sufficient information to uniquely identify the individual they are doing business with (usually this will be through an ID check with a credit reference agency). The individual's full name, date of birth and 6 years of address history would normally be sufficient. HMRC will probably have enough of that to be able to cross reference.

The data about individuals is included in the Type 3 records of the annual return, and includes name, address, postcode, NINO (if known), and DOB.

eskbanker

Aminatidi said:

And how do they collect tax on savings interest?

So say I open a savings account with X and deposit enough to make £1100 interest over a year and I'm paid interest monthly.

That's over my £1000 PSA so as a regular PAYE employee on tax code 1257L.

What happens next?

If you exceed £1K in 2023/24, for example, they'll send you an assessment during 2024/25, and collect the owed tax via PAYE coding adjustment in 2025/26 (unless you elect to pay it sooner).