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How does HMRC know our savings amounts?

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.

«1345678

Comments

  • Kim_13
    Kim_13 Posts: 3,084 Forumite
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    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
    Ayr_Rage Posts: 2,075 Forumite
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    edited 29 October 2023 at 1:49PM
    The providers who pay you interest report it to HMRC, just like your employer does with your salary.
  • Barkin
    Barkin Posts: 654 Forumite
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    Banks, building societies etc report it to HMRC. 
  • 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
    Brie Posts: 13,779 Ambassador
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    How can they report it if they don't have your NI?  I've never been asked for mine for opening an account.
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  • Sea_Shell
    Sea_Shell Posts: 9,898 Forumite
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    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.
    How's it going, AKA, Nutwatch? - 12 month spends to date = 2.56% of current retirement "pot" (as at end January 2025)
  • 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.
  • 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
    masonic Posts: 25,806 Forumite
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    edited 29 October 2023 at 12:41PM
    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
    eskbanker Posts: 35,888 Forumite
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    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).
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