Tax Deduction for Savings Interest

thriftytracey

My fault, I should have read my tax coding but see I have been taxed for interest on savings.  It's not a huge amount, but I really cannot believe I have received over £1,000 in savings interest.  We have modest savings and a few shares about £10k in value for which we receive dividends.  

Does HMRC trawl every savings account?  I am not sure about the dividends, if they are counted, but they wouldn't amount to more than £250 a year.  I am also a non taxpayer as my income from my personal pension is less than the personal allowance, indeed my husband receives my marriage allowance.  I do not yet receive the state pension.  I realise I am not taxed on the savings interest yet, as I don't receive SP.  I don't know if this "accumulates" and then taken out when I do receive SP.

KevinG

It's what your income is for the whole tax year of 6 April to 5 April that matters, If your savings interest plus your pension for the whole year is less than the personal allowance then there is no tax to pay. Actually you may get £5,000 of interest tax free for a low income, see https://www.gov.uk/apply-tax-free-interest-on-savings. By the way, HMRC has never charged me for tax on interest, despite it being well over £1,000, I have had to declare it myself.

eskbanker

thriftytracey said:

My fault, I should have read my tax coding but see I have been taxed for interest on savings.  It's not a huge amount, but I really cannot believe I have received over £1,000 in savings interest.  We have modest savings and a few shares about £10k in value for which we receive dividends.  

Does HMRC trawl every savings account?

Each financial institution submits an annual report to HMRC with details of the interest they paid you, and that's what HMRC uses as the basis for their figure.  It's not uncommon for the figures to be inaccurate though, but you can advise them of a more accurate position if you have it - are you saying that they've applied a correction to your 2024/25 PAYE coding that's dissimilar to the savings interest you earned in 2023/24, or have you received a 2023/24 tax statement using a wrong figure?  The former is less of an issue, as tax collection via PAYE is always provisional and errors should self-correct over time, but if they've assessed you retrospectively using wrong figures, that would need to be sorted out sooner rather than later....

xylophone

You say that you have been taxed.

Are you saying that tax has been deducted from your pension payment?

See

https://forums.moneysavingexpert.com/discussion/comment/79585658/#Comment_79585658

zagfles

HMRC do this with non taxpayers who earn any interest at all. Even if well under £1000. It is pointless, causes utter confusion and sometimes taxes people far too much. A lot of the time it won't make any difference, for instance if your tax code is reduced to 1050N and you earn less than £10500 then you won't pay any tax anyway. 

Dazed_and_C0nfused

thriftytracey said:

My fault, I should have read my tax coding but see I have been taxed for interest on savings.  It's not a huge amount, but I really cannot believe I have received over £1,000 in savings interest.  We have modest savings and a few shares about £10k in value for which we receive dividends.  

Does HMRC trawl every savings account?  I am not sure about the dividends, if they are counted, but they wouldn't amount to more than £250 a year.  I am also a non taxpayer as my income from my personal pension is less than the personal allowance, indeed my husband receives my marriage allowance.  I do not yet receive the state pension.  I realise I am not taxed on the savings interest yet, as I don't receive SP.  I don't know if this "accumulates" and then taken out when I do receive SP.

Which is it?  Have you been taxed or not 🤔

Each tax year is looked at separately.

And dividends are not interest.  They are taxable but even if you have no spare Personal Allowance the first £500 is taxed at 0%.