Interest on savings - can I just pay the tax upfront?

Hengabecka

For the first time in my life I am looking at making over £1000 in interest on my savings in 2024-2025 (from 1-year fixed rate accounts I have recently opened). I am not looking for ways to avoid paying tax, but I absolutely dread having it taken from my salary via my tax code. Many reasons for this, not least being reluctant to revisit the trauma of continually wrestling with HMRC over the decade I was self-employed and the insane mistakes they made which ultimately cost me a couple of thousand. Also not keen on having my employer involved in tax issues that have nothing to do with my paid work. 
Can I submit a self-assessment pro-actively and pay the tax upfront? It won't be a large amount and I would so much prefer to get it sorted in one payment than have my regular salary nibbled at. 

jaypers

No. Always paid in arrears, although you could potentially ask for a tax code adjustment to take care of it via PAYE. Won’t be 100% accurate though. 

mebu60

Yes, you should be able to submit SA. But you won't pay up-front, will be in arrears the following January. So you should be able to achieve your objective of avoiding PAYE tax code adjustment and leave the tax owing to gain additional interest before being paid. 

It is possible to make payments on account but if you are only just breaching the need to pay tax on interest it's unlikely to be necessary. 

Cosmic_Life

Whenever I submit a tax return at the end of the year, once they calculate the money I owe, they offer the option to pay it as a lump sum which I always do, or have my PAYE code adjusted.

badmemory

Why pay before it is due?  Tax on interest accrued in the current tax year (23/24) is not actually due for payment until 31st January 25.  Whilst I wouldn't leave it until the last minute why would you pay it early.  I usually pay between Christmas & New Year having got even more interest.  The only reason not to wait would be if the amount being held to pay tax would affect the amount of benefits.

Hengabecka

Cosmic_Life said:

Whenever I submit a tax return at the end of the year, once they calculate the money I owe, they offer the option to pay it as a lump sum which I always do, or have my PAYE code adjusted.

This is good to know, thank you! So if I have understood correctly, tax on the interest that I make in 2024/2025 won't become payable until April 2025 and I then have the choice to pay it as a lump sum at that time, so as to avoid having my 2025-2026 tax code changed? 
Currently I am not submitting Self-Assessments, just PAYE - but I could voluntarily submit one?

Cosmic_Life

Hengabecka said:

Cosmic_Life said:

Whenever I submit a tax return at the end of the year, once they calculate the money I owe, they offer the option to pay it as a lump sum which I always do, or have my PAYE code adjusted.

This is good to know, thank you! So if I have understood correctly, tax on the interest that I make in 2024/2025 won't become payable until April 2025 and I then have the choice to pay it as a lump sum at that time, so as to avoid having my 2025-2026 tax code changed? 
Currently I am not submitting Self-Assessments, just PAYE - but I could voluntarily submit one?

That is correct, but April 2025 is the end of the tax year and you have until the end of the 2025 calendar year (actually January 2026) to make that payment. I usually aim to sort it out before December and pay in January

badmemory

You can file self assessment very soon after the end of the tax year of 5th April.  The tax due is not payable for almost 10 months, 31st January.  I would not leave it that late to pay as too many people leave their tax affairs until the end of January & HMRC tend to be a little overstretched as you can imagine.  Which is why I put my cheque in the post between Xmas & NY to arrive at the beginning of the year & CosmicLife pays in January.

Albermarle

Currently I am not submitting Self-Assessments, just PAYE - but I could voluntarily submit one?

It is heavily discouraged to submit one unnecessarily.

 Check if you need to send a Self Assessment tax return - GOV.UK (www.gov.uk)

poppystar

You’ll get a P800 with the tax owed on it along with a summary of how it’s calculated (I got mine for 22/23 last week) you can then either choose to pay the amount or wait until next year when they will collect it via your tax code. No need to submit a self assessment until interest exceeds £10k. If you try to do so you’ll probably just make matters worse since you do not fall into the self assessment group, as others have said above. 

Marmaduke123

You don't need to do the self assessment paperwork. I received a P800 tax statement in October, showing I had underpaid tax in the previous tax year. I knew this was because of untaxed interest on savings. I was given the option of paying it as a lump sum or having it recouped through my tax code for 2024/25. I opted to pay it as a lump sum.

"At the end of each tax year, HMRC send customers an End of Year Tax Calculation - P800 if they have under or overpaid their taxes. This personalised letter indicates whether the recipient needs to pay more tax or is eligible for a refund, the amount involved and how the payment or refund will be made."

Savings providers have to notify HMRC of interest paid to each saver. Unfortunately amounts are not shown on tax accounts, so may not be accurate. I believe you can ask HMRC for this information, if you want to check against your own records.