Increase in HMRC estimate for untaxed interest

RG2015

My wife's tax code for 2024/2025 has just been increased and HMRC show an increase in the figure for untaxed interest this year. The figure has increased from £149 to £870 and this is the only change. What I cannot see is how they have come to the new figure.

I can say that a tax rebate claim was submitted 4 weeks ago so it is no suprise that HMRC have examined her account. However, the claim detailed the estimate for this year's untaxed interest as £1,146, not £1,870 which their figure suggests.

£149 was the actual figure for 2022/2023, which is the last year where actual figures from the banks would have been received and finalised by HMRC. So this makes sense as the original figure.

A claim tax rebate claim was also submitted and paid out for 2023/2024 and this included untaxed interest of £1,379.

So my question is where could the figure of £870 have come from?

sheramber

The figure has increased from £149 to £870 and this is the only change

However, the claim detailed the estimate for this year's untaxed interest as £1,146, not £1,870 which their figure suggests.

So my question is where could the figure of £870 have come from?

iS IT £870 or £1870?

Dazed_and_C0nfused

sheramber said:

The figure has increased from £149 to £870 and this is the only change

However, the claim detailed the estimate for this year's untaxed interest as £1,146, not £1,870 which their figure suggests.

So my question is where could the figure of £870 have come from?

iS IT £870 or £1870?

I think the op is making a connection between the savings nil rate band and tax code deduction.

Which would be relevant for some people but not for plenty of others.

Without knowing all the data used in the tax code calculation it's impossible to say with any certainty what the £870 is.  It could be she has £870 unused tax code allowances when the code was reviewed and (some of) the interest is using those.

Impossible to say for certain though without knowing the full picture.

Hoenir

Do you have a personal online Tax Account? As it's possible to amend estimated on there. 

RG2015

Thanks for the responses.

@Dazed_and_C0nfused, I don’t follow you suggestion of the £870 being an unused tax code allowance.

£149 is the actual untaxed interest for 2022/2023 which HMRC would have received from the banks and used as an initial estimate for 2024/2025.

This £149 has been updated to £870 but my understanding was the only source of data for untaxed interest would be the banks. Hence my confusion.

Dazed_and_C0nfused

As we're now well past 30 June (the filing date for banks) HMRC could now be using the actual information for 2023-24.

When a new tax code is calculated if there are unused tax code allowances and someone has untaxed interest then the interest uses some (or all) of those allowance as that is his interest is taxed. Using spare allowances first before the 0% tax bands come into play.

So say HMRC know she had untaxed interest of £1,379 in 2023-24.  And her tax code allowances were £11,310.  And her estimated pension income was say £10,440.  That leaves spare tax code allowances of £870 and the first £870 of the interest will use those leaving a tax code of 1044N.  The untaxed interest deduction would be limited to £870 as otherwise it would mean the tax code was less than the estimated pension income and tax would be paid unnecessarily.

There may be some other explanation but that's one possibility.