Tax on savings - self assessment or PAYE

Gazelle1985
Gazelle1985 Posts: 145
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edited 2 January at 3:33PM in Cutting tax
2023/24 is the first year that I've earned over £500 in savings interest (higher rate tax payer). I'm expecting a letter with a tax code change later this year, but wondered if it would be easier to just do a self assessment to pay all the tax owed? I've kept very careful records of the interest I've received each month so I know exactly how much I owe. I'm wondering how accurate HMRC's records are and whether it can become messy going through a tax code change and paying through PAYE?

Comments

  • uknick
    uknick Posts: 1,610
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    I find SA for basic tax affairs pretty easy, but there again I've done it for some years now.

    I also like the fact by doing SA I'm in control of when I make the payments and know they're right.  Others like to use a tax code change as they can then forget about it.

    How accurate HMRC records are has been discussed here a number of times.  Some say they are, others say they're not.  For my view I refer you back to the previous paragraph.
  • Gazelle1985
    Gazelle1985 Posts: 145
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    Thank you. 

    Does anyone know what sort of information HMRC send you about the tax code change? i.e. do you get a letter with the full amount of tax owed and how that breaks down across the year? 
  • Ayr_Rage
    Ayr_Rage Posts: 827
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    All your savings providers are able to supply you a record of interest paid in any tax year, if they don't do it automatically I just request one.

    I have been filing SA returns since they were introduced and the figures obtained as above have never been queried, so the interest reported by the companies to HMRC must match my return.

    It does mean a balancing payment every year but to me that is much better than chasing your tail with annual tax code changes.
  • subjecttocontract
    subjecttocontract Posts: 1,751
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    Ayr_Rage said:
    All your savings providers are able to supply you a record of interest paid in any tax year, if they don't do it automatically I just request one.


    I think the question still remains unanswered as to whether savings accounts through platforms such as HL or Raisin actually report interest payments to HMRC.
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 12,797
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    Thank you. 

    Does anyone know what sort of information HMRC send you about the tax code change? i.e. do you get a letter with the full amount of tax owed and how that breaks down across the year? 
    You will likely get a number of different notifications.

    Assuming you can pay the tax via your tax code (this is not always possible) then, using 2023-24 as an example, you can expect to get,

    1.  A P800 tax calculation for 2023-24 later this summer/autumn showing any tax owed for 2023-24

    2.  An updated tax code for 2024-25 later this summer/autumn with an adjustment to provisionally collect any additional tax owed on interest for 2024-25.

    3.  This time next year a new tax code ready for 2025-26 including the tax owed from 2023-24.
  • Gazelle1985
    Gazelle1985 Posts: 145
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    Thank you. 

    Does anyone know what sort of information HMRC send you about the tax code change? i.e. do you get a letter with the full amount of tax owed and how that breaks down across the year? 
    You will likely get a number of different notifications.

    Assuming you can pay the tax via your tax code (this is not always possible) then, using 2023-24 as an example, you can expect to get,

    1.  A P800 tax calculation for 2023-24 later this summer/autumn showing any tax owed for 2023-24

    2.  An updated tax code for 2024-25 later this summer/autumn with an adjustment to provisionally collect any additional tax owed on interest for 2024-25.

    3.  This time next year a new tax code ready for 2025-26 including the tax owed from 2023-24.
    Thank you - that's so useful. And when will I start actually paying the additional tax? Later this year? Or at the beginning of the 2025/26 tax year? Would I be able to just pay it as a lump sum via SA at that point or would it be too late once the new tax code has been issued?


  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 12,797
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    edited 2 January at 3:23PM
    Thank you. 

    Does anyone know what sort of information HMRC send you about the tax code change? i.e. do you get a letter with the full amount of tax owed and how that breaks down across the year? 
    You will likely get a number of different notifications.

    Assuming you can pay the tax via your tax code (this is not always possible) then, using 2023-24 as an example, you can expect to get,

    1.  A P800 tax calculation for 2023-24 later this summer/autumn showing any tax owed for 2023-24

    2.  An updated tax code for 2024-25 later this summer/autumn with an adjustment to provisionally collect any additional tax owed on interest for 2024-25.

    3.  This time next year a new tax code ready for 2025-26 including the tax owed from 2023-24.
    Thank you - that's so useful. And when will I start actually paying the additional tax? Later this year? Or at the beginning of the 2025/26 tax year? Would I be able to just pay it as a lump sum via SA at that point or would it be too late once the new tax code has been issued?



    You would start paying any additional tax due for 2024-25 (based on an estimate from 2023-24) during 2024-25.

    The tax due for 2023-24 would be collected equally each payday between 6 April 2025 and 5 April 2026 (where collection via your tax code is possible).

    Not sure where Self Assessment fits into this or do you already need to complete a tax return for some other reason?

    You can just pay any tax owed for 2023-24 direct to HMRC once you get the calculation if you prefer.

    Also, have you factored in any available savings starter rate band?
  • Gazelle1985
    Gazelle1985 Posts: 145
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    Thank you. 

    Does anyone know what sort of information HMRC send you about the tax code change? i.e. do you get a letter with the full amount of tax owed and how that breaks down across the year? 
    You will likely get a number of different notifications.

    Assuming you can pay the tax via your tax code (this is not always possible) then, using 2023-24 as an example, you can expect to get,

    1.  A P800 tax calculation for 2023-24 later this summer/autumn showing any tax owed for 2023-24

    2.  An updated tax code for 2024-25 later this summer/autumn with an adjustment to provisionally collect any additional tax owed on interest for 2024-25.

    3.  This time next year a new tax code ready for 2025-26 including the tax owed from 2023-24.
    Thank you - that's so useful. And when will I start actually paying the additional tax? Later this year? Or at the beginning of the 2025/26 tax year? Would I be able to just pay it as a lump sum via SA at that point or would it be too late once the new tax code has been issued?



    You would start paying any additional tax due for 2024-25 (based on an estimate from 2023-24) during 2024-25.

    The tax due for 2023-24 would be collected equally each payday between 6 April 2025 and 5 April 2026 (where collection via your tax code is possible).

    Not sure where Self Assessment fits into this or do you already need to complete a tax return for some other reason?

    You can just pay any tax owed for 2023-24 direct to HMRC once you get the calculation if you prefer.

    Also, have you factored in any available savings starter rate band?
    Thank you, that makes sense. 

    I was asking about self assessment because I'm considering doing that instead of paying through my salary (I just wonder if it'll be easier/more accurate as I've kept careful records of the tax on my interest due). But would I need to do a self assessment BEFORE HMRC issue my new tax code?

    I'm eligible for £500 of tax free savings interest which I've already factored in.
  • Albermarle
    Albermarle Posts: 21,185
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    I was asking about self assessment because I'm considering doing that instead of paying through my salary (I just wonder if it'll be easier/more accurate as I've kept careful records of the tax on my interest due). But would I need to do a self assessment BEFORE HMRC issue my new tax code?

    HMRC actively discourage people from filling in SA's who do not need to . There is a check list for who should, and should not fill in a SA.

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

    I think it is possible to insist on filling one in even if you do not fulfil the criteria, but good luck with that.

    I think if you historically fill one in you can keep your head down, and just keep filling one in ( if you want to).


  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 12,797
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    Thank you. 

    Does anyone know what sort of information HMRC send you about the tax code change? i.e. do you get a letter with the full amount of tax owed and how that breaks down across the year? 
    You will likely get a number of different notifications.

    Assuming you can pay the tax via your tax code (this is not always possible) then, using 2023-24 as an example, you can expect to get,

    1.  A P800 tax calculation for 2023-24 later this summer/autumn showing any tax owed for 2023-24

    2.  An updated tax code for 2024-25 later this summer/autumn with an adjustment to provisionally collect any additional tax owed on interest for 2024-25.

    3.  This time next year a new tax code ready for 2025-26 including the tax owed from 2023-24.
    Thank you - that's so useful. And when will I start actually paying the additional tax? Later this year? Or at the beginning of the 2025/26 tax year? Would I be able to just pay it as a lump sum via SA at that point or would it be too late once the new tax code has been issued?



    You would start paying any additional tax due for 2024-25 (based on an estimate from 2023-24) during 2024-25.

    The tax due for 2023-24 would be collected equally each payday between 6 April 2025 and 5 April 2026 (where collection via your tax code is possible).

    Not sure where Self Assessment fits into this or do you already need to complete a tax return for some other reason?

    You can just pay any tax owed for 2023-24 direct to HMRC once you get the calculation if you prefer.

    Also, have you factored in any available savings starter rate band?
    Thank you, that makes sense. 

    I was asking about self assessment because I'm considering doing that instead of paying through my salary (I just wonder if it'll be easier/more accurate as I've kept careful records of the tax on my interest due). But would I need to do a self assessment BEFORE HMRC issue my new tax code?

    I'm eligible for £500 of tax free savings interest which I've already factored in.
    There is no £500 "tax free savings interest".  Interest is either tax exempt (cash ISA's) or taxable. 

    You probably mean the £500 savings nil rate band (aka Personal Savings Allowance) where the first £500 of interest is taxed at 0%.

    Don't forget that all taxable interest, even that taxed at 0%, forms part of your adjusted net income.  ANI is used to determine any HICBC or tapered Personal Allowance for higher earners.

    Unless your interest is £10,000 or more then HMRC won't deem a return to be needed (assuming no other criteria applies).
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