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

RG2015

Hengabecka said:

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. 

The process is as follows using the tax year 2024-2025 as an example as this is the year you are looking at.

1. After the tax year end on 5 Apr 2025 the banks and building societies will report the interest received to HMRC. They need to do this by 30 June 2025.
2. If you are due to pay tax on this, in October 2025 or thereabouts, HMRC will send you a P800 detailing your unpaid tax.
3. The details will be also available for you to view on your personal tax account online.
4. In most cases HMRC will advise you that the unpaid tax will be collected in 2026-2027 by an adjustment to your tax code.
5. However you will offered the chance to pay the tax immediately online, ie in October 2025
6. Finally HMRC will estimate that you will have the same amount of unpaid tax interest in the years 2025-2026 and 2026-2027.
7. They may then further adjust your tax code for 2026-2027 to factor in the estimated unpaid tax for 2025-2026 and 2026-2027.

I have to say that my point 7 above looks a bit odd, and would appreciate confirmation from others if this is correct.

Edit: I also think that even if the unpaid tax for 2024-2025 is paid immediately (in October 2025) that HMRC will still adjust the 2026-2027 tax code to collect the estimated unpaid tax for 2025-2026 and 2026-2027. Confirmation on this also would be much appreciated 

Dazed_and_C0nfused

RG2015 said:

Hengabecka said:

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. 

The process is as follows using the tax year 2024-2025 as an example as this is the year you are looking at.

1. After the tax year end on 5 Apr 2025 the banks and building societies will report the interest received to HMRC. They need to do this by 30 June 2025.
2. If you are due to pay tax on this, in October 2025 or thereabouts, HMRC will send you a P800 detailing your unpaid tax.
3. The details will be also available for you to view on your personal tax account online.
4. In most cases HMRC will advise you that the unpaid tax will be collected in 2026-2027 by an adjustment to your tax code.
5. However you will offered the chance to pay the tax immediately online, ie in October 2025
6. Finally HMRC will estimate that you will have the same amount of unpaid tax in the year 2025-2026 and 2026-2027.
7. They may then further adjust your tax code for 2026-2027 to factor in the estimated unpaid tax for 2025-2026 and 2026-2027.

I have to say that my point 7 above looks a bit odd, and would appreciate confirmation from others if this is correct.

Edit: I also think that even if the unpaid tax for 2024-2025 is paid immediately (in October 2025) that HMRC will still adjust the 2026-2027 tax code to collect the estimated unpaid tax for 2025-2026 and 2026-2027. Confirmation on this also would be much appreciated 

It can vary from person to person and although 5 isn't wrong that isn't really necessary.

The key thing is to pay the tax by the end of December (or thereabouts), it doesn't have to be paid as soon as the P800 is received.   You could pay it in March however by that point HMRC will have calculated the first code to be used for the upcoming tax year so if you are trying to avoid that code being adjusted for tax owed from a prior year then paying it by December, ahead of the first code being calculated would be sensible.

Don't agree with 6 (Finally HMRC will estimate that you will have the same amount of unpaid tax in the year 2025-2026 and 2026-2027).  It's the amount of interest they will assume is the same, not the tax due.

I think 7 would be fairly unusual.  A more common scenario would be that the 2025-26 tax code is amended and the (provisional) extra tax due for 2025-26, whatever that happens to be, is collected throughout the rest of 2025-26.

The tax code for 2026-27 will try and collect the (provisional) tax due on interest for 2026-27, but not normally the (provisional) amount due for 2025-26.

RG2015

Dazed_and_C0nfused said:

RG2015 said:

Hengabecka said:

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. 

The process is as follows using the tax year 2024-2025 as an example as this is the year you are looking at.

1. After the tax year end on 5 Apr 2025 the banks and building societies will report the interest received to HMRC. They need to do this by 30 June 2025.
2. If you are due to pay tax on this, in October 2025 or thereabouts, HMRC will send you a P800 detailing your unpaid tax.
3. The details will be also available for you to view on your personal tax account online.
4. In most cases HMRC will advise you that the unpaid tax will be collected in 2026-2027 by an adjustment to your tax code.
5. However you will offered the chance to pay the tax immediately online, ie in October 2025
6. Finally HMRC will estimate that you will have the same amount of unpaid tax in the year 2025-2026 and 2026-2027.
7. They may then further adjust your tax code for 2026-2027 to factor in the estimated unpaid tax for 2025-2026 and 2026-2027.

I have to say that my point 7 above looks a bit odd, and would appreciate confirmation from others if this is correct.

Edit: I also think that even if the unpaid tax for 2024-2025 is paid immediately (in October 2025) that HMRC will still adjust the 2026-2027 tax code to collect the estimated unpaid tax for 2025-2026 and 2026-2027. Confirmation on this also would be much appreciated 

It can vary from person to person and although 5 isn't wrong that isn't really necessary.

The key thing is to pay the tax by the end of December (or thereabouts), it doesn't have to be paid as soon as the P800 is received.   You could pay it in March however by that point HMRC will have calculated the first code to be used for the upcoming tax year so if you are trying to avoid that code being adjusted for tax owed from a prior year then paying it by December, ahead of the first code being calculated would be sensible.

Don't agree with 6 (Finally HMRC will estimate that you will have the same amount of unpaid tax in the year 2025-2026 and 2026-2027).  It's the amount of interest they will assume is the same, not the tax due.

I think 7 would be fairly unusual.  A more common scenario would be that the 2025-26 tax code is amended and the (provisional) extra tax due for 2025-26, whatever that happens to be, is collected throughout the rest of 2025-26.

The tax code for 2026-27 will try and collect the (provisional) tax due on interest for 2026-27, but not normally the (provisional) amount due for 2025-26.

Thanks for your view on point 7. I thought it felt wrong as I was writing it.

As regards point 6, I do agree with you that my wording was imprecise and hence incorrect.

However the OP should be aware that HMRC will assume the same interest for year 2 and year 3. And as a result they will initially estimate that additional tax will be payable for these years.

Therefore there appears to be is no way for the OP to avoid a tax code adjustment in future years.

Thirty9

If someone needs to pay more tax on their interest than they earn from working, does the tax code still change (to a minus figure) and any outstanding tax is paid by self-assessment?

Dazed_and_C0nfused

Thirty9 said:

If someone needs to pay more tax on their interest than they earn from working, does the tax code still change (to a minus figure) and any outstanding tax is paid by self-assessment?

It's possible to have a negative (K prefix) tax code but an employer/pension payer is limited to deducting more than 50% in tax.

If they cannot deduct enough tax, say because the pension is tiny, then HMRC will normally issue a Simple Assessment.

Self Assessment would only be necessary if the interest was £10k or more (or another Self Assessment criteria applied).

mebu60

RG2015 said:

Dazed_and_C0nfused said:

RG2015 said:

Hengabecka said:

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. 

The process is as follows using the tax year 2024-2025 as an example as this is the year you are looking at.

1. After the tax year end on 5 Apr 2025 the banks and building societies will report the interest received to HMRC. They need to do this by 30 June 2025.
2. If you are due to pay tax on this, in October 2025 or thereabouts, HMRC will send you a P800 detailing your unpaid tax.
3. The details will be also available for you to view on your personal tax account online.
4. In most cases HMRC will advise you that the unpaid tax will be collected in 2026-2027 by an adjustment to your tax code.
5. However you will offered the chance to pay the tax immediately online, ie in October 2025
6. Finally HMRC will estimate that you will have the same amount of unpaid tax in the year 2025-2026 and 2026-2027.
7. They may then further adjust your tax code for 2026-2027 to factor in the estimated unpaid tax for 2025-2026 and 2026-2027.

I have to say that my point 7 above looks a bit odd, and would appreciate confirmation from others if this is correct.

Edit: I also think that even if the unpaid tax for 2024-2025 is paid immediately (in October 2025) that HMRC will still adjust the 2026-2027 tax code to collect the estimated unpaid tax for 2025-2026 and 2026-2027. Confirmation on this also would be much appreciated 

It can vary from person to person and although 5 isn't wrong that isn't really necessary.

The key thing is to pay the tax by the end of December (or thereabouts), it doesn't have to be paid as soon as the P800 is received.   You could pay it in March however by that point HMRC will have calculated the first code to be used for the upcoming tax year so if you are trying to avoid that code being adjusted for tax owed from a prior year then paying it by December, ahead of the first code being calculated would be sensible.

Don't agree with 6 (Finally HMRC will estimate that you will have the same amount of unpaid tax in the year 2025-2026 and 2026-2027).  It's the amount of interest they will assume is the same, not the tax due.

I think 7 would be fairly unusual.  A more common scenario would be that the 2025-26 tax code is amended and the (provisional) extra tax due for 2025-26, whatever that happens to be, is collected throughout the rest of 2025-26.

The tax code for 2026-27 will try and collect the (provisional) tax due on interest for 2026-27, but not normally the (provisional) amount due for 2025-26.

Thanks for your view on point 7. I thought it felt wrong as I was writing it.

As regards point 6, I do agree with you that my wording was imprecise and hence incorrect.

However the OP should be aware that HMRC will assume the same interest for year 2 and year 3. And as a result they will initially estimate that additional tax will be payable for these years.

Therefore there appears to be is no way for the OP to avoid a tax code adjustment in future years.

Unless they pursue the previously suggested SA route and are able to make payments on account in the subsequent years? 

Dazed_and_C0nfused

mebu60 said:

RG2015 said:

Dazed_and_C0nfused said:

RG2015 said:

Hengabecka said:

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. 

The process is as follows using the tax year 2024-2025 as an example as this is the year you are looking at.

1. After the tax year end on 5 Apr 2025 the banks and building societies will report the interest received to HMRC. They need to do this by 30 June 2025.
2. If you are due to pay tax on this, in October 2025 or thereabouts, HMRC will send you a P800 detailing your unpaid tax.
3. The details will be also available for you to view on your personal tax account online.
4. In most cases HMRC will advise you that the unpaid tax will be collected in 2026-2027 by an adjustment to your tax code.
5. However you will offered the chance to pay the tax immediately online, ie in October 2025
6. Finally HMRC will estimate that you will have the same amount of unpaid tax in the year 2025-2026 and 2026-2027.
7. They may then further adjust your tax code for 2026-2027 to factor in the estimated unpaid tax for 2025-2026 and 2026-2027.

I have to say that my point 7 above looks a bit odd, and would appreciate confirmation from others if this is correct.

Edit: I also think that even if the unpaid tax for 2024-2025 is paid immediately (in October 2025) that HMRC will still adjust the 2026-2027 tax code to collect the estimated unpaid tax for 2025-2026 and 2026-2027. Confirmation on this also would be much appreciated 

It can vary from person to person and although 5 isn't wrong that isn't really necessary.

The key thing is to pay the tax by the end of December (or thereabouts), it doesn't have to be paid as soon as the P800 is received.   You could pay it in March however by that point HMRC will have calculated the first code to be used for the upcoming tax year so if you are trying to avoid that code being adjusted for tax owed from a prior year then paying it by December, ahead of the first code being calculated would be sensible.

Don't agree with 6 (Finally HMRC will estimate that you will have the same amount of unpaid tax in the year 2025-2026 and 2026-2027).  It's the amount of interest they will assume is the same, not the tax due.

I think 7 would be fairly unusual.  A more common scenario would be that the 2025-26 tax code is amended and the (provisional) extra tax due for 2025-26, whatever that happens to be, is collected throughout the rest of 2025-26.

The tax code for 2026-27 will try and collect the (provisional) tax due on interest for 2026-27, but not normally the (provisional) amount due for 2025-26.

Thanks for your view on point 7. I thought it felt wrong as I was writing it.

As regards point 6, I do agree with you that my wording was imprecise and hence incorrect.

However the OP should be aware that HMRC will assume the same interest for year 2 and year 3. And as a result they will initially estimate that additional tax will be payable for these years.

Therefore there appears to be is no way for the OP to avoid a tax code adjustment in future years.

Unless they pursue the previously suggested SA route and are able to make payments on account in the subsequent years? 

That wouldn't necessarily prevent the current tax code from being updated to try and collect additional tax for the current tax year.

subjecttocontract

I thought we had established that savings interest on accounts offered through Raisin ARE NOT reported to HMRC.
Or have I got that wrong ?

RG2015

subjecttocontract said:

I thought we had established that savings interest on accounts offered through Raisin ARE NOT reported to HMRC.
Or have I got that wrong ?

Was Raisin the only platform that apparently didn't report interest to HMRC?

Also I believe that someone needs to be held responsible for this anomaly and wouldn't be surprised if this was corrected in the near future.

Dazed_and_C0nfused

RG2015 said:

subjecttocontract said:

I thought we had established that savings interest on accounts offered through Raisin ARE NOT reported to HMRC.
Or have I got that wrong ?

Was Raisin the only platform that apparently didn't report interest to HMRC?

Also I believe that someone needs to be held responsible for this anomaly and wouldn't be surprised if this was corrected in the near future.

Agree, can't imagine someone somewhere in HMRC won't realise that things are falling through the cracks.

HL (Active Savings) was another where the same issue seemed to have occurred.