HMRC Bank Interest returns: A mess?

soulsaver

I asked HMRC for a list of the bank interest data for the 2023/4 tax year which I now have, in print. 

The entries 'Source' is categorised as 'Actual' or 'Estimate'

I reconciled most of the Actual entries with my records... but there were a few bank returns they were missing (several app based) plus a lot of 'estimates'.

Slightly worryingly, ALL the larger 'estimates' are incorrect - I haven't received the interest they have estimated - at least not in 2023/4 - the larger estimates were values that I have certificated as 2022/23 interest - £1k+.

One 'actual' entry had Santander sort code & ac number and a value I could reconcile exactly with a Santander 2023/4 interest credit.. but it names another bank for it? 

HMRCs uncorrected total exceeds mine for the same banks by £3.0K +.

Any comments? 

Will this get resolved just by SA? Or should I be taking any other approach?

Dazed_and_C0nfused

soulsaver said:

I asked HMRC for a list of the bank interest data for the 2023/4 tax year which I now have, in print. 

The entries 'Source' is categorised as 'Actual' or 'Estimate'

I reconciled most of the Actual entries with my records... but there were a few bank returns they were missing (several app based) plus a lot of 'estimates'.

Slightly worryingly, ALL the larger 'estimates' are incorrect - I haven't received the interest they have estimated - at least not in 2023/4 - the larger estimates were values that I have certificated are 2022/23 interest - £1k+.

One 'actual' entry had Santander sort code & ac number and a value I could reconcile exactly with a Santander 2023/4 interest credit.. but it names another bank for it? 

HMRCs uncorrected total exceeds mine for the same banks by £3.0K +.

Any comments? 

Will this get resolved just by SA? Or should I be taking any other approach?

It might look a mess but I suspect that's simply because of the timing of when HMRC have responded to your request.

Banks have until 30 June to provide the data for the previous tax year and it no doubt takes HMRC a while to process all that data.

If you look at the guidance below there looks to be a system where the estimates from the prior year (2022-23) are sorted if no update is received for the latest tax year (2023-24).

To be honest I would have expected every "Estimate" to be wrong in the sense that it will relate to the previous year (2022-23) and will presumably be updated to an "Actual" once the 2023-24 data is all processed.  Or be reduced to nil as per the guidance below.

If you asked for the list for 2024-25 it would presumably all be "Estimate" entries at the moment.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye96010

Which bank is named instead of Santander?

And if you are filing a tax return anyway all of the above is pretty irrelevant, it's your return which counts.  The onus is on HMRC to challenge you if they think you have filed an incorrect return.

soulsaver

Thanks @Dazed_and_C0nfused - good to have it clarified by someone who demonstrably knows their stuff.

I know what you're thinking - but it was named as Cov BS, but the sort code they entered was Sant's 09 01 29.

Sarahspangles

Dazed_and_C0nfused said:

If you look at the guidance below there looks to be a system where the estimates from the prior year (2022-23) are sorted if no update is received for the latest tax year (2023-24).

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye96010

Is that the right link?

I’m also looking at this issue. I’m waiting on my P800 to resolve 2023/24’s overpayment of tax on savings, which should happen as I have provided evidence of SIPP contributions which take me out of the higher rate tax band. 2024/25’s notice of coding started out with an assumption I’d get the same amount of interest this year as last, but has recently been reissued and now factors in actual interest to date in 2024/25 - but this is mostly instead of, not as well as the 2023/24 interest since I’ve moved savings about. Presumably I’ve got another 12 months to wait for a rebate for this year’s overpayment.

I’m more worried about OH. He owes tax for 2023/24 on £ks of savings. Hopefully his P800 will be in the same post as mine so he can resolve this. His interest this year will trigger self assessment as he’s over the £10k threshold. We need to get our heads round when that needs to be submitted and paid.

soulsaver

Sarahspangles said:

His interest this year will trigger self assessment as he’s over the £10k threshold. We need to get our heads round when that needs to be submitted and paid.

Paper submissions for 2023/24 by Oct 31 2024, or online by Jan 31st 2025- both pay by Jan 31st... IIRC
2024/25 Oct 31 2025 etc.

I'm not sure what the rule is, but there maybe a requirement for an additional 50% on account towards for the following FY - there is for me  

Sarahspangles

soulsaver said:

Sarahspangles said:

His interest this year will trigger self assessment as he’s over the £10k threshold. We need to get our heads round when that needs to be submitted and paid.

Paper submissions for 2023/24 by Oct 31 2024, or online by Jan 31st 2025- both pay by Jan 31st... IIRC
2024/25 Oct 31 2025 etc.

I'm not sure what the rule is, but there maybe a requirement for an additional 50% on account towards for the following FY - there is for me  

Thanks - I believe - big spreadsheet etc - that he’s slightly under £10k for 2023/24 but over this tax year. So he should get a P800 with a bill for last year, have some of this year’s collected through a revised notice of coding, then submit a tax return going forward. I think. I can’t find anywhere that explains how you transition from PAYE to SA

soulsaver

Sarahspangles said:

soulsaver said:

Sarahspangles said:

His interest this year will trigger self assessment as he’s over the £10k threshold. We need to get our heads round when that needs to be submitted and paid.

Paper submissions for 2023/24 by Oct 31 2024, or online by Jan 31st 2025- both pay by Jan 31st... IIRC
2024/25 Oct 31 2025 etc.

I'm not sure what the rule is, but there maybe a requirement for an additional 50% on account towards for the following FY - there is for me  

Thanks - I believe - big spreadsheet etc - that he’s slightly under £10k for 2023/24 but over this tax year. So he should get a P800 with a bill for last year, have some of this year’s collected through a revised notice of coding, then submit a tax return going forward. I think. I can’t find anywhere that explains how you transition from PAYE to SA

I believe you have to register for SA by Oct 5th in the year it becomes relevant - ie 2024/25 get >£10K savings interest need to have SA registered by Oct 5th 2025.

Dazed_and_C0nfused

Sarahspangles said:

Dazed_and_C0nfused said:

If you look at the guidance below there looks to be a system where the estimates from the prior year (2022-23) are sorted if no update is received for the latest tax year (2023-24).

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye96010

Is that the right link?

I’m also looking at this issue. I’m waiting on my P800 to resolve 2023/24’s overpayment of tax on savings, which should happen as I have provided evidence of SIPP contributions which take me out of the higher rate tax band. 2024/25’s notice of coding started out with an assumption I’d get the same amount of interest this year as last, but has recently been reissued and now factors in actual interest to date in 2024/25 - but this is mostly instead of, not as well as the 2023/24 interest since I’ve moved savings about. Presumably I’ve got another 12 months to wait for a rebate for this year’s overpayment.

I’m more worried about OH. He owes tax for 2023/24 on £ks of savings. Hopefully his P800 will be in the same post as mine so he can resolve this. His interest this year will trigger self assessment as he’s over the £10k threshold. We need to get our heads round when that needs to be submitted and paid.

Yes.

Selected extracts,

PAYE96010 - Reconcile individual: un-reconciled cases: cases that will be automatically reconciled

Where the outcome of the database scans (PAYE96001) shows that CY-1 is open and

Where there is outstanding BBSI information (untaxed interest) for the year and the value held in CY-1 is an estimate.

The scan will then try to reconcile CY-1. It will use the standard rules for reconciliation with several exceptions. It will

Update the account level BBSI to reduce the interest value to nil in CY-1 and update the source to 'Actual BBSI Pre-pop.'

SnowMan

The current structure for dealing with savings interest does seem a recipe for HMRC to produce wrong tax assessments, while making it difficult for taxpayers to get their errors corrected, especially with interest rates having gone up and more people having interest over £1,000 (or £500).

I recently completed an R40 for 2023/2024 because I had received an estate distribution which included savings interest net of tax (as detailed on the R185 I sent to myself as I was also executor).

Having that estate income stops you filling in a self-assessment tax return online which is why I had to go down that route.

HMRC wrote to me to say that there appeared to be an error on my R40 as savings interest is always paid gross and they would therefore not process my R40. I am assuming they had overlooked that the estate savings interest that I put down in the trust, settlement and estate income section of the R40 would have been after tax. The fact that there is a box for tax paid on the R40 (and the R185 tells you to put it there) should have been a clue to them that net savings interest is possible. I rang them up to try and work out if it is was the net savings interest included in the estate distribution that was indeed the net interest they were talking about. They refused to tell me as they said they couldn't put me through to the department dealing with the claim and told me to write in. I pointed out that I was trying to sort out the issue they thought they had identified, and unless they told me specifically what that issue was it would be hard to know what to put in that letter. 

Anyway I've written in to them with details of every interest payment I received for 2023/2024. I also had an account in my name which I used solely as an executor account, so I also pre-emptively mentioned that shouldn't be included as my personal interest despite the account being in my name (and pointing out the estate had separately paid tax on that interest because it was above de minimis limits and hence why I had received net interest) on the assumption they would query that next.

The point is, that because the taxpayer can't easily see what interest HMRC have recorded as savings interest for the individual, it's quite hard to get HMRC to correct incorrect savings interest figures.     

Dazed_and_C0nfused

SnowMan said:

The current structure for dealing with savings interest does seem a recipe for HMRC to produce wrong tax assessments, while making it difficult for taxpayers to get their errors corrected, especially with interest rates having gone up and more people having interest over £1,000 (or £500).

I recently completed an R40 for 2023/2024 because I had received an estate distribution which included savings interest net of tax (as detailed on the R185 I sent to myself as I was also executor).

Having that estate income stops you filling in a self-assessment tax return online which is why I had to go down that route.

HMRC wrote to me to say that there appeared to be an error on my R40 as savings interest is always paid gross and they would therefore not process my R40. I am assuming they had overlooked that the estate savings interest that I put down in the trust, settlement and estate income section of the R40 would have been after tax. The fact that there is a box for tax paid on the R40 (and the R185 tells you to put it there) should have been a clue to them that net savings interest is possible. I rang them up to try and work out if it is was the net savings interest included in the estate distribution that was indeed the net interest they were talking about. They refused to tell me as they said they couldn't put me through to the department dealing with the claim and told me to write in. I pointed out that I was trying to sort out the issue they thought they had identified, and unless they told me specifically what that issue was it would be hard to know what to put in that letter. 

Anyway I've written in to them with details of every interest payment I received for 2023/2024. I also had an account in my name which I used solely as an executor account, so I also pre-emptively mentioned that shouldn't be included as my personal interest despite the account being in my name (and pointing out the estate had separately paid tax on that interest because it was above de minimis limits and hence why I had received net interest) on the assumption they would query that next.

The point is, that because the taxpayer can't easily see what interest HMRC have recorded as savings interest for the individual, it's quite hard to get HMRC to correct incorrect savings interest figures.     

I suspect that the inclusion of taxed interest may have meant you were caught by this new process HMRC have implemented?

https://www.litrg.org.uk/news/ppi-tax-refunds-new-evidence-requirement

SnowMan

Dazed_and_C0nfused said:

I suspect that the inclusion of taxed interest may have meant you were caught by this new process HMRC have implemented?

https://www.litrg.org.uk/news/ppi-tax-refunds-new-evidence-requirement

Thanks.

I can understand that an attempt to reclaim net interest would be a potential risk factor for HMRC, as I could have just claimed I'd received net interest from an estate distribution, when I hadn't, and they have no way of cross referencing my claim to the estate payment of tax as that doesn't identify the beneficiaries. At least they should be able to tie mine in now as I sent them a copy of their own letter about the estate tax due and explained how it all was connected.

The wording they used was some waffle about since 2016 bank savings interest has been paid gross so we don't think you have net interest. Perhaps that's a paragraph they use regardless of the source of the net interest, or perhaps they just picked the wrong paragraph to 'paste in'.