HMRC On account for savings interest

Juliette100

I wonder if someone can advise me.  I am a PAYE employee.  All my tax and NI are taken at source yet I complete a self assessment for my savings tax.   I do not earn over 60k PAYE and my savings amount to approx 1.5k a year.   I completed my self assessment this year and owed just on 500£ interest.   I had 366 on account already but the message back on my account is that I owe the difference (as expected) but I also own interest on the difference starting from the end of the 22/23 tax year.   Is this the case now.  Do I need to project what I may earn in savings for example 23/24 and put this on account in prep for the end of tax year 2024 to avoid having interest charged up to Jan when I submit my 2024 self assessment.  Often I don't get my interest until Dec each year so it will be a guess but I assume I have to put money on account for this to avoid such interest.  I was not aware I had to do this.  So if this is correct it is a lesson learned.         

Dazed_and_C0nfused

Juliette100 said:

I wonder if someone can advise me.  I am a PAYE employee.  All my tax and NI are taken at source yet I complete a self assessment for my savings tax.   I do not earn over 60k PAYE and my savings amount to approx 1.5k a year.   I completed my self assessment this year and owed just on 500£ interest.   I had 366 on account already but the message back on my account is that I owe the difference (as expected) but I also own interest on the difference starting from the end of the 22/23 tax year.   Is this the case now.  Do I need to project what I may earn in savings for example 23/24 and put this on account in prep for the end of tax year 2024 to avoid having interest charged up to Jan when I submit my 2024 self assessment.  Often I don't get my interest until Dec each year so it will be a guess but I assume I have to put money on account for this to avoid such interest.  I was not aware I had to do this.  So if this is correct it is a lesson learned.         

Your post is a little confusing.

You don't normally need to complete a Self Assessment due to interest unless it is £10,000 or more (when no other reason for Self Assessment exists).

Unless your 2021-22 return showed payments on account were required for 2022-23 then all tax due for 2022-23 would be payable by 31 January 2024 and interest would only be charged if paid after that.

POA for 2023-24 would only be required if the tax due for 2022-23 was £1,000 or more (and there are other criteria to be considered before POA for 2023-24 would come into play).

Are you sure it isn't HMRC crediting you with interest 🤔

Could you post the extract details of your Self Assessment transactions?

Juliette100

Hi Dazed_and_C0nfused.  HMRC are not crediting. I owe them based on what they have said for tax based on 2022/2023.  The tax is tied to my savings which was approx 1500£. My earnings were or are under 100k so the self assessment was just for the savings which had not been taxed at all.  My bank entered gross sums only.  I agree with the tax figure but included in that is interest for ‘no payment on account for the second half of the tax year 2022/2023. I had money on account but it didn’t cover the entire savings tax so the interest is on the difference and started from the end of the tax year 2023 to Jan 2024 for tax yeae 2022/2023.  I didn’t realise I had to put money on account ahead of time for savings. But they have added interest for May onwards only the amount over what I had in account in the tax year 22/23

Juliette100

From what I can tell - I failed to put money on account for potential interest on savings.  It says the interest is for 'accruing late payment interest for second payment on account due 31st July 2023.   My actual tax payment for savings is 600£ and I had £366 on account.   As I failed to have further funds on account it seems for the second 6 month period 22/23 I have acquired interest on the shortfall on account (240£ish) as I had gross savings interest of 1500£ for 22/23 and did not put enough funds on account to cover this.  I have made payment and thought as I only gained bank interest in Dec and submitted info before Jan 31 and made payment before Jan 31 - I would not be liable for interest.        

Dazed_and_C0nfused

POA are nothing to do with individual sources of income but are (initially) based on the position from the previous return.

So it sounds like POA for 2022-23 were required due to your 2021-22 return.

If the Self Assessment liability for 2022-23 is less than £1,000 then no POA will be needed for 2023-24 and all tax due for 2023-24 will be payable by 31 January 2025.

BoGoF

Did you have a tax liability for 2021-22 that generated Payments on Account for 2022-23? If so, did you then make a claim to reduce these POA's and when you submitted your 2022-23 Tax Return your overall tax due was more than you had reduced your POA's to?

It's the only conclusion I can draw. The onus is on you to ensure that what you reduce any POA's to is an accurate reflection of what your final liability will be taking into account all sources of income.

Going forward, you will only have POA's for 2023/24 if your 2022/23 liability was over £1,000 and therefore you won't have to estimate any amount on account if less than £1,000

Albermarle

My earnings were or are under 100k so the self assessment was just for the savings which had not been taxed at all. 
The rules are that you only need to complete an SA if your interest earned exceeds £10K. Otherwise HMRC take the interest info from the providers and calculate any tax automatically, usually around October.
There should be no need to fill in a SA for £1,5K and a bit surprised the system actually let you.

Juliette100

Thank you BoGoF.  I looked back and 21/22 didn't generate a POA - I gained 500£ interest in that year but I am starting to think this may be an error on HMRCs side.  I have paid my 22/23 liability along with the interest just to clear the clock but I will be checking in with them purely to understand if their calcs are correct and try to understand what has happened. I looked back at previous submissions and on my online account it shows the tax due for the previous 3 years and says on the page - payment on account 1st and 2nd payments = 0 so I am really confused as to what the charge is for but i am going to explore further - thank you so much for your comms this is really helpful.

Juliette100

Albermarle thank you.   I find this subject so difficult and when HMRCs calcs are not clear it sends me into a head spin but your comms helps. Thank you!    

Dazed_and_C0nfused

Could you look at your Self Assessment calculation for 2021-22 and check what the bottom line is for that year?

If no POA were generated from the 2021-22 return I'm not sure how you could be charged late payment interest for 2022-23 🤔

Juliette100

Hi Dazed_and_C0nfused.  I had a look back and I had nil POA payments due both in Jan and July. I think this may be a typo as I had no POA shown - both payments due show 0 and yet I gained late payment charges.  My interest tax was less than 1000 and my earnings 100% paye and having read more on this - regardless it seems no POA would be due.  I went back to pre 20-21 and again my interest was minimal ie less than 1000 and I've always been a PAYE employee