Self assessment tax return - how do I know if my interest is taxed or untaxed?

DQY

Hi all,

I'm trying to complete my self assessment tax return for the first time - I registered to be able to claim back on gift aided charity donations which I have been making regularly for some years but never claimed on. I am employed and all the rest goes via PAYE. 

My question is about the interest earned section: I know I went above the PSA for 2022/23. However, I don't know whether my interest was already taxed via a tax code adjustment and I cannot work out how to tell! I assume it was? But then how do I check and correct if HMRC's estimation was incorrect? I don't want to enter the interest earned in the wrong box and risk paying tax twice on it. 

Can't get through to HMRC (unsurprisingly given how close we are to the 31st) - can anyone help me on how I figure it out?

Thank you!

Middle_of_the_Road

If interest is from savings accounts in banks/building societies, then is always paid without tax deducted.

eskbanker

DQY said:

I don't know whether my interest was already taxed via a tax code adjustment and I cannot work out how to tell! I assume it was?

Your interest wasn't taxed, even if there was a tax code adjustment that resulted in more tax being deducted from your PAYE earnings - this would ultimately offset any liability arising from the savings interest but that interest hasn't had tax deducted from it directly, so goes in the untaxed interest box ("Untaxed UK interest — amounts which have not had tax taken off") rather than "Taxed UK interest — the net amount after tax has been taken off".

intalex

And any interest from an ISA should not be included in either box, it should be left out altogether from the self assessment.

DQY

Thank you for the quick answers!

So if my tax code was adjusted to take more from PAYE earnings because of an HMRC estimate of the interest I *would* earn in this tax year, how are adjustments made if needed because the estimate and the actual don't align? Apologies if a stupid question!

eskbanker

DQY said:

Thank you for the quick answers!

So if my tax code was adjusted to take more from PAYE earnings because of an HMRC estimate of the interest I *would* earn in this tax year, how are adjustments made if needed because the estimate and the actual don't align? Apologies if a stupid question!

HMRC conduct a reconciliation process after they've received all the submissions from the banks and building societies, and if adjustment is needed, in either direction, then it'll be applied automatically to the following year's tax code, i.e. 2022/23 calculations are made during 2023/24 and applied to the code for 2024/25.  Assessments will usually be sent out late in the calendar year.

This assumes the individual doesn't self-assess - if they do then it's the self-assessment that drives that process of reconciling expected versus actual.

Edit: doh, forgot that you're self-assessing, so ignore the first chunk of this post!

masonic

DQY said:

Thank you for the quick answers!

So if my tax code was adjusted to take more from PAYE earnings because of an HMRC estimate of the interest I *would* earn in this tax year, how are adjustments made if needed because the estimate and the actual don't align? Apologies if a stupid question!

A calculation will be performed as part of the submission process. You can check the calculation makes sense before final submission. You would be able to claim a repayment if you have overpaid.

ColdIron

When making a declaration you don't get to chose what you declare and what you don't, that might be seen as misrepresentation. Enter the correct sums and let HMRC deal with it, it will all come out in the wash

DQY

Ok, that makes sense, thank you: so I just put the interest I have earned into the "Untaxed interest" box.

@ColdIron, I'm not sure what you mean re declaring - I was just unsure which box the number (total interest in the tax year) went in (taxed or untaxed), not about what that number was i.e. how much I declare - ?

Dazed_and_C0nfused

I think the bit you are missing is that if you have paid extra tax due to the make up of your tax code then that is reflected in the tax deducted from your employment or pension income.

Which you will get credit for on your Self Assessment calculation.

It isn't tax deducted from the interest itself.

Also, Gift Aid isn't a reason in itself to need to complete a tax return.

DQY

Hi all, apologies for disappearing - have a v tiny baby and got called to other duties!

@Dazed_and_C0nfused - thanks, I'm not sure I totally follow. My starting question was whether, as someone who is employed and pays income tax via PAYE (and usually doesn't complete a Self Assessment tax return), tax on my savings interest is dealt with through adjustments to my tax code (and hence already taken), or whether it is untaxed until I report total interest in the self assessment form. The piece that confuses me is this line on the gov.uk site:

"HMRC automatically deducts tax on any savings interest you owe, if you’re employed or get a pension."

This applies to me (I am employed), hence why I am confused about whether I report the interest as taxed or untaxed.