How does HMRC know our savings amounts?

BooJewels

mebu60 said:

BooJewels said:

Can I ask a supplementary question in view of what @mebu60 has just posted - if I get interest paid monthly and get a payment each from 2 fixes in April - one on 3rd and one on 9th.  My thinking is that the one on the 3rd would be declared in the earlier year just ending and the one on the 9th would be declared in the next tax year - as those are the tax years in which I received the money and it was spendable.

But do they actually count it to the day - so the one received on the 3rd would be accounted for as a month + 2 days in the earlier tax year and the one on the 9th would be something like 26 days in the earlier year and 4 days in the later year?

HMRC have made a complete mess of my tax and NI account when someone decided during an online chat session to just delete my business as a source of income and remove my status as self employed.  I'm not looking forward to this particular aspect being added into the mix.

What you say in para 1 is correct. My previous comment relates solely to HMRC treatment of state pension. 

Thank you for the clarification.  I haven't had need to submit the information yet (on account of them losing my self-assessment status and have not yet fixed it) but will need to do so soon for 22/23 and wondered if I'd worked it out incorrectly.  Thanks.

Brie

eskbanker said:

Brie said:
I think we're agreeing but from different points of view.

My unique name would help me now but if it was me when I was still living at home there could be 5 people at the address with very similar names that might be confused (even confused my dad frankly....)

And yes mandatory tax returns do cause a lot of work for a tax department - the fact that they might now be done online should eliminate a lot of work though.  So the bank sends me an official receipt for tax paid, I submit that with my tax return and the tax office can tick off what I've submitted against the long list they've received from the bank.  The only ones they then need to investigate are the ones that aren't submitted, ticked off the list.  They can then look at the various John Smiths or Bries living at whatever address.  And likely fine those who haven't submitted anything at all.

I don't think we're agreeing, especially on the mandatory tax return issue, where it still seems to me that you're both downplaying the workload involved in processing these (which would obviously entail significantly more than 'ticking off' savings interest submissions) and failing to make a case that there'd actually be any benefit!

I not suggesting the UK should adopt mandatory tax returns.  I like it that PAYE and a relatively simple tax regime for the average individual means that they are not required here rather being a necessity for everyone earning money in any way.  The benefit is only in the fact that the bank would be telling me exactly how much interest I earned and I would then be able to tell HMRC the exact amount.  No guessing involved by anyone.  Obviously no one in their right mind would think that this, in and of itself, is a great reason to get us all submitting something that is not necessary for the majority.  The biggest benefit in other countries that have a mandatory tax return is to those individuals/companies who get paid to complete these for others.

masonic

Brie said:

eskbanker said:

Brie said:
I think we're agreeing but from different points of view.

My unique name would help me now but if it was me when I was still living at home there could be 5 people at the address with very similar names that might be confused (even confused my dad frankly....)

And yes mandatory tax returns do cause a lot of work for a tax department - the fact that they might now be done online should eliminate a lot of work though.  So the bank sends me an official receipt for tax paid, I submit that with my tax return and the tax office can tick off what I've submitted against the long list they've received from the bank.  The only ones they then need to investigate are the ones that aren't submitted, ticked off the list.  They can then look at the various John Smiths or Bries living at whatever address.  And likely fine those who haven't submitted anything at all.

I don't think we're agreeing, especially on the mandatory tax return issue, where it still seems to me that you're both downplaying the workload involved in processing these (which would obviously entail significantly more than 'ticking off' savings interest submissions) and failing to make a case that there'd actually be any benefit!

I not suggesting the UK should adopt mandatory tax returns.  I like it that PAYE and a relatively simple tax regime for the average individual means that they are not required here rather being a necessity for everyone earning money in any way.  The benefit is only in the fact that the bank would be telling me exactly how much interest I earned and I would then be able to tell HMRC the exact amount.  No guessing involved by anyone.  Obviously no one in their right mind would think that this, in and of itself, is a great reason to get us all submitting something that is not necessary for the majority.  The biggest benefit in other countries that have a mandatory tax return is to those individuals/companies who get paid to complete these for others.

What we had in the works, which was better IMHO, was the ability to view the data submitted by banks in our Personal Tax Accounts. This avoids the need for the individual to contact or submit anything to HMRC unless they are one of the small minority for whom there is some sort of discrepancy.

HMRC certainly isn't going to want to turn off the rich feed of data it is getting direct from the financial institutions and instead rely on more fallible consumers who might easily forget about one or more of their accounts when disclosing their interest.

eskbanker

Brie said:

I not suggesting the UK should adopt mandatory tax returns.

OK, but it certainly seemed that you were originally:

Brie said:

...makes me wonder if the foreign system of requiring everyone to submit a tax return would actually be more practical.  

Brie said:

I like it that PAYE and a relatively simple tax regime for the average individual means that they are not required here rather being a necessity for everyone earning money in any way.  The benefit is only in the fact that the bank would be telling me exactly how much interest I earned and I would then be able to tell HMRC the exact amount.  No guessing involved by anyone.  Obviously no one in their right mind would think that this, in and of itself, is a great reason to get us all submitting something that is not necessary for the majority.

There shouldn't be any guesswork at the moment - those who submit tax returns should use the figures already supplied to them by banks and building societies (either in certificate or statement form), and those who aren't required to submit tax returns obviously don't need to, but in both scenarios, any subsequent discrepancy between the taxpayer's view and HMRC's will become apparent when the latter issues its assessment.

I do agree with those making the point that greater transparency would help resolve such anomalies, but forcing more to submit tax returns wouldn't address that issue either.

Brie said:
The biggest benefit in other countries that have a mandatory tax return is to those individuals/companies who get paid to complete these for others.

That seems to be another good argument against mandatory tax returns!

RG2015

Shylock_249 said:

RG2015 said:

Shylock_249 said:

RG2015 said:

Shylock_249 said:

RG2015 said:

Kim_13 said:

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.

I asked this question (whether HMRC have overstated interest on your P800) on the tax board and nobody has responded as yet.

My conclusion would be that HMRC may understate, if a bank doesn't report interest, but never overstate it.

Well I can confirm that they do get it wrong.  I contacted HMRC and asked for a print out of the details they held on my account for FY 2022 - 23. They sent a list containing 18 entries both "Estimates" and "Actual".  Of the 18 only 7 were actual accounts.  The actual figures were correct, these being the figures submitted by the financial institutions.  I phoned HMRC and went through the details. The assistant deleted spurious entries.  One building society had yet to submit their figures; the assistant said they should have the details by (IIRC) 21 September.  Eventually after going through the figures, waiting until the building society reported and requesting an updated list my figure and HMRC's agreed.  They sent me a P800 and I paid the money I owed them rather than have them correct the figure through PAYE.

My wife is the joint holder of all our taxable accounts, therefore her figures should be the same as mine.  I requested a list of her figures, phoned through the differences with the assistant. I thought that was that but last week my wife received her P800 and the figure shown for BBSI (Banks and Building Society Interest) is higher by £197.00 (£196.58), so I shall have to phone them again and ask for a list and phone through the discrepancies.

I am only asking about P800 interest figures.

I am not referring to estimates used for a tax year that is yet to be assessed. Were your 11 estimates included on your P800 and hence part of the calculation for tax due?

Regarding your wife’s P800, it is not clear yet that HMRC have overstated the interest figure for 2022/2023. However this will be established when you have the full breakdown.

Para 1. The figures on my wife's P800 are wrong.  HMRC have got it wrong.

Firstly, many thanks for sharing this information with us. However, I am a bit hazy on the figures on your wife's tax account.

You said earlier;

"......last week my wife received her P800 and the figure shown for BBSI (Banks and Building Society Interest) is higher by £197.00 (£196.58), so I shall have to phone them again and ask for a list and phone through the discrepancies."

Until HMRC give you the full list including the £196.58 you cannot say categorically that they have got it wrong.

At this point, either HMRC have included £196.58 in error or your have excluded an interest stream of £196.58.

From my perspective it would be very disturbing if HMRC had made an error. But I would prefer to know for sure and be prepared for this happening for me.

Well I'll eat my calculator if my figures are incorrect. But I do accept that I shall have to see the list.

I do all the banking and financial business and keep meticulous records. My wife suffered a stroke 2 years ago etc. In the FY 2021 - 22 I added my wife's name to all our taxpaying accounts, neither of us has a sole account. By my reckoning both of our BBSI for FY 2022 - 23 will be the same.

It's always for consideration that a bank/building society reports a joint account as being a sole account. But as I wrote HMRC and my figures agree. 

Thanks again. I am really torn now. I don’t want you to be wrong as I admire greatly anyone that keeps meticulous financial records.

But I hate the idea that HMRC can overstate someone’s interest “actual”. Just as bad is a savings provider giving incorrect data to HMRC.

Will just have to wait and see.

Brie

eskbanker said:

Brie said:
The biggest benefit in other countries that have a mandatory tax return is to those individuals/companies who get paid to complete these for others.

That seems to be another good argument against mandatory tax returns!

Well yes. I thought you'd agree with that!!  

Not that I ever got paid to do others returns but I did get a few free beers from grad students and family members who weren't very money savvy and would look at the huge pack of paperwork to be completed and panic. 

Cloth_of_Gold

Dazed_and_C0nfused said:

Cloth_of_Gold said:

If you are a retired single person, below state retirement age, but have an occupational pension which exceeds the £12,570 personal allowance and have savings income over £1000 are they likely to use simple assessment? How would they collect the tax due - via a change in your tax code or by you making a one-off payment?

The preference is to collect the tax due via your tax code.

But if that isn't possible then HMRC will issue a Simple Assessment and you would need to pay the tax direct, usually by 31 January after the end of the tax year.

Have you taken account of the savings starter rate band (if available for you to use)?

Why is that? I'm confused as to when they change your tax code to recover an underpayment and when they allow you to make a one-off payment.

Bigwheels1111 said:

Cloth_of_Gold said:

If you are a retired single person, below state retirement age, but have an occupational pension which exceeds the £12,570 personal allowance and have savings income over £1000 are they likely to use simple assessment? How would they collect the tax due - via a change in your tax code or by you making a one-off payment?

Is your pension below £17,570 ?. 
If so the difference between income and pension can be starter rate savings.

Say you get a pension of £15,000, the £2,570 left can be starter rate for savings and tax free.
Then you still get £1,000 PSA on top.
Up to £18,570 before tax is due. Well kind of.
£12,570 tax free earnings.
£ 5,000 starter savings rate tax free, interest from savings.
£ 1,000 PSA tax free.
£18,570 tax free if you meet this criteria.

If your pension is 15k, you would pay 20% tax on £2030.00 . £15,000 - £12.570 = £2030.00.
£406.00 tax.

For saving interest it would be £18,570 - £15,000 = £3,570 of interest tax free.
The 5k starter savings rate is reduced by any income over £12,570 and between £17,570.
Does that make sense.

You might not have any tax to pay.

No, the pension is more than that so the £5K SSR doesn't apply.

Dazed_and_C0nfused

Cloth_of_Gold said:

Dazed_and_C0nfused said:

Cloth_of_Gold said:

If you are a retired single person, below state retirement age, but have an occupational pension which exceeds the £12,570 personal allowance and have savings income over £1000 are they likely to use simple assessment? How would they collect the tax due - via a change in your tax code or by you making a one-off payment?

The preference is to collect the tax due via your tax code.

But if that isn't possible then HMRC will issue a Simple Assessment and you would need to pay the tax direct, usually by 31 January after the end of the tax year.

Have you taken account of the savings starter rate band (if available for you to use)?

Why is that? I'm confused as to when they change your tax code to recover an underpayment and when they allow you to make a one-off payment.

Bigwheels1111 said:

Cloth_of_Gold said:

If you are a retired single person, below state retirement age, but have an occupational pension which exceeds the £12,570 personal allowance and have savings income over £1000 are they likely to use simple assessment? How would they collect the tax due - via a change in your tax code or by you making a one-off payment?

Is your pension below £17,570 ?. 
If so the difference between income and pension can be starter rate savings.

Say you get a pension of £15,000, the £2,570 left can be starter rate for savings and tax free.
Then you still get £1,000 PSA on top.
Up to £18,570 before tax is due. Well kind of.
£12,570 tax free earnings.
£ 5,000 starter savings rate tax free, interest from savings.
£ 1,000 PSA tax free.
£18,570 tax free if you meet this criteria.

If your pension is 15k, you would pay 20% tax on £2030.00 . £15,000 - £12.570 = £2030.00.
£406.00 tax.

For saving interest it would be £18,570 - £15,000 = £3,570 of interest tax free.
The 5k starter savings rate is reduced by any income over £12,570 and between £17,570.
Does that make sense.

You might not have any tax to pay.

No, the pension is more than that so the £5K SSR doesn't apply.

I don't know for certain but I guess it's in keeping with the basic principle of trying to collect tax via the tax code as much as possible.

But it doesn't stop you from paying the tax direct if you prefer.

Cloth_of_Gold

Dazed_and_C0nfused said:

Cloth_of_Gold said:

Dazed_and_C0nfused said:

Cloth_of_Gold said:

If you are a retired single person, below state retirement age, but have an occupational pension which exceeds the £12,570 personal allowance and have savings income over £1000 are they likely to use simple assessment? How would they collect the tax due - via a change in your tax code or by you making a one-off payment?

The preference is to collect the tax due via your tax code.

But if that isn't possible then HMRC will issue a Simple Assessment and you would need to pay the tax direct, usually by 31 January after the end of the tax year.

Have you taken account of the savings starter rate band (if available for you to use)?

Why is that? I'm confused as to when they change your tax code to recover an underpayment and when they allow you to make a one-off payment.

Bigwheels1111 said:

Cloth_of_Gold said:

If you are a retired single person, below state retirement age, but have an occupational pension which exceeds the £12,570 personal allowance and have savings income over £1000 are they likely to use simple assessment? How would they collect the tax due - via a change in your tax code or by you making a one-off payment?

Is your pension below £17,570 ?. 
If so the difference between income and pension can be starter rate savings.

Say you get a pension of £15,000, the £2,570 left can be starter rate for savings and tax free.
Then you still get £1,000 PSA on top.
Up to £18,570 before tax is due. Well kind of.
£12,570 tax free earnings.
£ 5,000 starter savings rate tax free, interest from savings.
£ 1,000 PSA tax free.
£18,570 tax free if you meet this criteria.

If your pension is 15k, you would pay 20% tax on £2030.00 . £15,000 - £12.570 = £2030.00.
£406.00 tax.

For saving interest it would be £18,570 - £15,000 = £3,570 of interest tax free.
The 5k starter savings rate is reduced by any income over £12,570 and between £17,570.
Does that make sense.

You might not have any tax to pay.

No, the pension is more than that so the £5K SSR doesn't apply.

I don't know for certain but I guess it's in keeping with the basic principle of trying to collect tax via the tax code as much as possible.

But it doesn't stop you from paying the tax direct if you prefer.

OK thanks. We would both prefer to do that rather than have our tax codes fiddled with.

poppystar

Even if someone pays the tax direct in year 1 then aren’t HMRC going to fiddle with/change the tax code for subsequent years on the assumption that that amount of interest will continue? Or is there a way to stop them doing that?