Does HMRC automatically claim tax on Savings?

Pat38493

Can someone just remind me - am I correct in thinking that if I have used multiple savings accounts in the tax year and I am going over the relevant tax free savings allowance for my marginal rate, HMRC will figure this out automatically and alter my tax coding the following year to collect the tax?

In other words I don't need to request to fill out a self assessment and/or inform HMRC of all the accounts and relevant amounts, and I don't need to manually calculate how much tax is due?

(unless I already fill out a tax return for other reasons which I don't).

born_again

Banks report interest to HMRC who will then bill you for the tax.

Mark_d

You need to register for Self Assessment if your income from savings and investments is over £10,000.

Pat38493

Mark_d said:

You need to register for Self Assessment if your income from savings and investments is over £10,000.

Thanks - and if it's less than this, and if I have income streams like pension or earnings, does HMRC normally simply adjust the tax code for the following year to collect the tax?

Also they would automatically figure out how much savings interest I earned in total above the relevant allowance?

Meaning that normally this wouldn't happen until some weeks or months after the end of the relevant tax year?

Also - if I had a GIA account but the money is sitting in cash in the GIA account (or Money market fund for example), in that case I would have to report it to HMRC?

eskbanker

Pat38493 said:

Mark_d said:

You need to register for Self Assessment if your income from savings and investments is over £10,000.

Thanks - and if it's less than this, and if I have income streams like pension or earnings, does HMRC normally simply adjust the tax code for the following year to collect the tax?
The coding adjustment is in the third year, i.e. if you underpaid tax in 2023/24, they'd adjust your code for 2025/26 to collect that (and would possibly also adjust the one for 2024/25 in anticipation of a similar liability during that year).

Also they would automatically figure out how much savings interest I earned in total above the relevant allowance?
Yes, their assessment process tots up your total taxable income from all sources, deducts any allowances, and compares the resultant liability figure with what was deducted via PAYE.

Meaning that normally this wouldn't happen until some weeks or months after the end of the relevant tax year?
Yes, normally in the autumn.

Also - if I had a GIA account but the money is sitting in cash in the GIA account (or Money market fund for example), in that case I would have to report it to HMRC?
I'd have thought (but am not sure) that interest paid on cash in a GIA should be reported directly to HMRC by the platform.

See above....

Hoenir

Onus remains on the taxpayer to ensure that the figures are correct. Not every source reports to the HMRC as yet. 

Albermarle

Hoenir said:

Onus remains on the taxpayer to ensure that the figures are correct. Not every source reports to the HMRC as yet. 

Not made easier by the fact that the interest figures that HMRC do receive , can not be checked on your personal tax account online.
You have to call them and ask for a summary, which may or may not match up with your own figures.

Kim_13

I'm wondering if they now adjust in year. I've just had my tax code changed and there's no tax outstanding that would explain it. The reduction is almost £40 more than the interest earned in 24/25 as at the date of issue, but if Saffron reported at the point that the figure appeared in the maturity manager, it would be correct if rounded to the nearest £10 in HMRC's favour. The reduction is of about half of what was credited in 23/24 if they were assuming I'd earn the same again, so that doesn't seem to be it.

ThePirates

Does it have to result in a tax code change or do you get there option to pay a lump sum?

Dazed_and_C0nfused

ThePirates said:

Does it have to result in a tax code change or do you get there option to pay a lump sum?

Even if would result in a tax code change to collect underpaid tax you can still pay this direct to HMRC and avoid the tax code adjustment.

This usually works on a 3 year cycle

Year 1 earn the interest 
Year 2 bank reports the interest for year and HMRC calculate and extra tax due
Year 3 the tax owed for year 1 is included in the tax code for year 3

Once you get the calculation in year 2 you can then pay what is owed and avoid that underpayment being included in your tax code for year 3.

Dazed_and_C0nfused

Kim_13 said:

I'm wondering if they now adjust in year. I've just had my tax code changed and there's no tax outstanding that would explain it. The reduction is almost £40 more than the interest earned in 24/25 as at the date of issue, but if Saffron reported at the point that the figure appeared in the maturity manager, it would be correct if rounded to the nearest £10 in HMRC's favour. The reduction is of about half of what was credited in 23/24 if they were assuming I'd earn the same again, so that doesn't seem to be it.

Yes but I think it's too early for that to relate to interest received for 2023-24 as banks have until the end of June to report the figures to HMRC.