HMRC taxed 95 pounds savings interest

Bikerrick

Hi, today my wife received notification that she owed HMRC £256 due to medical insurance cover from her employer not behind added until a few months into the tax year.
The notification also included an amount of £95 untaxed interest from her current account. My understanding is that interst is tax free up to £1000, she is way off that limit.
We called HMRC but they just confused us even more!
Any ideas why this was added? I have never seen this sort of addition to my tax code notifications.

Dazed_and_C0nfused

Bikerrick said:

Hi, today my wife received notification that she owed HMRC £256 due to medical insurance cover from her employer not behind added until a few months into the tax year.
The notification also included an amount of £95 untaxed interest from her current account. My understanding is that interst is tax free up to £1000, she is way off that limit.
We called HMRC but they just confused us even more!
Any ideas why this was added? I have never seen this sort of addition to my tax code notifications.

Is this a tax code or a tax calculation (P800/PA302)?

ISA interest is tax exempt but interest from a current account would all be taxable.  Although depending on what other income she had the first £6,000 might be taxed at 0%.

eskbanker

Bikerrick said:

The notification also included an amount of £95 untaxed interest from her current account. My understanding is that interst is tax free up to £1000, she is way off that limit.

No, it's taxable income, but taxed at 0% - this may seem a semantic distinction, but exactly how is it reflected in the calculation of her tax due and/or new coding?

masonic

There is nothing unusual about HMRC coding for untaxed interest if someone has it. The first £1000 interest is only tax free if someone's income from all sources doesn't exceed the higher rate tax threshold, otherwise they get £500, or £0, tax free depending on how much income they earn for the year. If she is a really high earner, then that could explain it.

Dazed_and_C0nfused

Or it could simply be a P800 or PA302 with £95 taxed at 0%?

RG2015

Bikerrick said:

Hi, today my wife received notification that she owed HMRC £256 due to medical insurance cover from her employer not behind added until a few months into the tax year.
The notification also included an amount of £95 untaxed interest from her current account. My understanding is that interst is tax free up to £1000, she is way off that limit.
We called HMRC but they just confused us even more!
Any ideas why this was added? I have never seen this sort of addition to my tax code notifications.

I received a P800 tax notification a week or so back with details of my untaxed interest. Crucially it showed it was taxed at 0%.

Like you I had never seen this sort of notification before. The only reason I received it was because of other untaxed income. In my case this was due to tax on my state pension being underpaid.

Like others have said you should check if your wife’s notification shows that the interest is taxed at 0%.