HMRC and savings interest

susanann_2

I am a basic rate tax payer and this year 23/24 will use all of my £5000 allowance & the £1000 sorry can’t remember their proper names and will need to pay some income tax. On my latest tax code notice 24/25 HMRC have put an amount of £396 for untaxed interest. First I should not have to pay any tax on interest for 22/23 but will do for 23/24 which I assume HMRC will not know about yet until after the tax year ends and they receive notification from banks/ building societies. So I’m unsure what this £396 is do they have to tell you how they reached this figure. I tried calling them twice today waited over an hour each time and did not get through, my calls cost 27p minute after 60mins so had to hang up. Twice the web chat that was useless as well. Hoping someone knows how this is going to work as people are just entering the tax year they will receive more interest than the allowances. 

eskbanker

susanann_2 said:

I am a basic rate tax payer and this year 23/24 will use all of my £5000 allowance & the £1000 sorry can’t remember their proper names and will need to pay some income tax.

How much interest did you earn in 2022/23, and did you avoid tax on it solely by virtue of it falling within allowances that may no longer be usable if you're earning more non-savings income as implied?

masonic

They will give you a breakdown if you ask. If phoning / web chat are causing you bother, you could write to them. How much interest do you think you earned?

susanann_2

For 22/23 is zero as the allowances cover it. 23/24 there will be some tax to pay just waiting till I can collate them all. But 23/24 interest should not be on the tax code yet as far as I can tell as they will not be told about them till after the end of the tax year. I will have to send a letter to find out what it is but as far as I can tell it should not be on there till next year 25/26 goodness knows hold long a reply will be. I thought this was what the government gateway was for but there is no breakdown of the £396 on there. 

Sarahspangles

I had an in-year change to my tax code a few months ago, because HMRC said they believed I had untaxed interest this tax year.  My other half has had several changes to his, each within days of him closing an account and receiving interest.

I just assumed this was how HMRC’s process had always worked, it’s just more visible now that interest rates are higher.

masonic

susanann_2 said:

For 22/23 is zero as the allowances cover it. 23/24 there will be some tax to pay just waiting till I can collate them all. But 23/24 interest should not be on the tax code yet as far as I can tell as they will not be told about them till after the end of the tax year. I will have to send a letter to find out what it is but as far as I can tell it should not be on there till next year 25/26 goodness knows hold long a reply will be. I thought this was what the government gateway was for but there is no breakdown of the £396 on there. 

They won't receive data for 23/24 for several months. Sometimes they assume accounts that paid interest in prior years will continue to pay interest going forward and work on that basis. This can be a problem if those accounts matured.

eskbanker

susanann_2 said:

For 22/23 is zero as the allowances cover it. 

My question (and masonic's) was how much interest you earned, as opposed to whether any tax was due on it....

Dazed_and_C0nfused

susanann_2 said:

For 22/23 is zero as the allowances cover it. 23/24 there will be some tax to pay just waiting till I can collate them all. But 23/24 interest should not be on the tax code yet as far as I can tell as they will not be told about them till after the end of the tax year. I will have to send a letter to find out what it is but as far as I can tell it should not be on there till next year 25/26 goodness knows hold long a reply will be. I thought this was what the government gateway was for but there is no breakdown of the £396 on there. 

You are getting confused, HMRC won't include the interest received in 2023-24 in your tax code yet.

At the moment, for 2023-24 and 2024-25 tax codes they will be estimating your interest, often using the amount received in the latest complete tax year (2022-23) as the estimate.

When they have received all the details for 2023-24 (usually late summer as the banks have until the end of June to send the details in) they will send you a calculation showing any tax due for 2023-24 and also update your 2024-25 tax code.

They updated tax code should use the new latest information (from 2023-24) as the estimate for 2024-25.

Don't forget the deduction in your tax code rarely matches the interest itself as it purely a mechanism to collect extra tax.

For example if your interest was £2,000 and HMRC wanted to provisionally collect £200 extra towards your tax liability then the tax code deduction would often be £1,000.  A £1,000 deduction for a basic rate payer would mean your employer or pension payer deducted at extra £200 (£1,000 x 20%).

susanann_2

22/23 tax year was £1596

eskbanker

susanann_2 said:

22/23 tax year was £1596

So if they can see that you're earning at least £17,570 in non-savings income during 2023/24, it's a reasonable assumption that there'd be £596 of interest on which you'd pay tax this year and next?  Still unclear how that would correlate to the figure you've seen on your coding though!

TheWoodler

This has been a really useful thread for me and has cleared up a lot that I couldn’t get out of HMRC. I’ve had a similar sort of query and it’s been hard to resolve - with me being deaf I have to use the Extra Support webchat. 

I have no problems handling spreadsheets, self-assessment etc., and consider myself fairly bright, but honestly what was initially a fairly simple query left me more confused than I was when I started. 

Thanks to @susanann_2 asking the question and all the helpful responses here (thank you @Dazed_and_C0nfused, @eskbanker and @masonic) I’ve worked things out. 

You’ve succeeded where HMRC failed! 

I did make the point in the feedback survey after the chat ended that my inability to use the phone is my only barrier. For many Deaf people there’s an additional barrier in the use of English. If the conversation was opaque to me when I don’t have that barrier with using English, then the Extra Support service isn’t being as accessible as it is supposed to be. It could have done with being conducted in plain English.