Interest 2023/4 and tax calculation

SiliconChip

I expect that the interest I earned in 2023/4 (from 9 accounts with 7 banks/building societies) when combined with pension payments will require additional tax to be paid. 

My personal tax account still says "Your Income Tax has not been calculated yet for 6 April 2023 to 5 April 2024". 

The accompanying text says that the calculation is usually done between June and October, as it's the last day of October and there's been no communication from HMRC that deadline has probably been missed.

Have other people with interest to be taxed had their calculations yet or is everyone still waiting for HMRC to collate the data and complete the calculations? If the latter is there any update on when it might be done? I note that the 2022/3 calculation was completed on 5th October 2023.

eskbanker

SiliconChip said:

The accompanying text says that the calculation is usually done between June and October, as it's the last day of October and there's been no communication from HMRC that deadline has probably been missed.

I don't think saying that something is "usually done between June and October" constitutes a deadline of the end of October!  I'm pretty sure I've seen others on this board reporting the same lack of visible progress though, but don't believe there's any obligation on HMRC to provide a running commentary on when it'll be completed.

molerat

Most things tax wise are usually done by the end of October but this year they seem behind schedule

Dazed_and_C0nfused

SiliconChip said:

I expect that the interest I earned in 2023/4 (from 9 accounts with 7 banks/building societies) when combined with pension payments will require additional tax to be paid. 

My personal tax account still says "Your Income Tax has not been calculated yet for 6 April 2023 to 5 April 2024". 

The accompanying text says that the calculation is usually done between June and October, as it's the last day of October and there's been no communication from HMRC that deadline has probably been missed.

Have other people with interest to be taxed had their calculations yet or is everyone still waiting for HMRC to collate the data and complete the calculations? If the latter is there any update on when it might be done? I note that the 2022/3 calculation was completed on 5th October 2023.

You might be caught by this (look for references to "BBSI").

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

SiliconChip

eskbanker said:

SiliconChip said:

The accompanying text says that the calculation is usually done between June and October, as it's the last day of October and there's been no communication from HMRC that deadline has probably been missed.

I don't think saying that something is "usually done between June and October" constitutes a deadline of the end of October!  I'm pretty sure I've seen others on this board reporting the same lack of visible progress though, but don't believe there's any obligation on HMRC to provide a running commentary on when it'll be completed.

Deadline is probably the wrong term to use, but given this has been happening for a few years now you'd have thought that the banks and HMRC would have got the process running smoothly enough to have everything done by the end of October. The "no communication" comment was in reference to not having had an email from HMRC yet to tell me to check my personal tax account, which is what I got last year on 6th October, rather than an expectation that they'd tell me it hadn't been done.

If the issue is what @Dazed_and_C0nfused has suggested then shouldn't HMRC be banging on the door of the tardy banks to ensure that they provide the data in a timely fashion, and issuing the appropriate penalties if they fail to do so?

https://www.gov.uk/guidance/bank-and-building-society-interest-returns#submitting-your-return

eskbanker

I'm just speculating here but imagine that the exercise is significantly more substantial this year than previously, by virtue of a perfect storm of high wage inflation, high savings interest rates and frozen tax thresholds, resulting in far more income tax to be reclaimed outside of PAYE?

Dazed_and_C0nfused

SiliconChip said:

eskbanker said:

SiliconChip said:

The accompanying text says that the calculation is usually done between June and October, as it's the last day of October and there's been no communication from HMRC that deadline has probably been missed.

I don't think saying that something is "usually done between June and October" constitutes a deadline of the end of October!  I'm pretty sure I've seen others on this board reporting the same lack of visible progress though, but don't believe there's any obligation on HMRC to provide a running commentary on when it'll be completed.

Deadline is probably the wrong term to use, but given this has been happening for a few years now you'd have thought that the banks and HMRC would have got the process running smoothly enough to have everything done by the end of October. The "no communication" comment was in reference to not having had an email from HMRC yet to tell me to check my personal tax account, which is what I got last year on 6th October, rather than an expectation that they'd tell me it hadn't been done.

If the issue is what @Dazed_and_C0nfused has suggested then shouldn't HMRC be banging on the door of the tardy banks to ensure that they provide the data in a timely fashion, and issuing the appropriate penalties if they fail to do so?

https://www.gov.uk/guidance/bank-and-building-society-interest-returns#submitting-your-return

I'm not sure that always is the issue?

If a bank reports interest for one tax year HMRC assume (rightly or wrongly) that the same interest will be received for the following tax year. 

This is how they estimate the interest for the current tax year, and for the forthcoming tax year when their annual tax code process takes place.

So at the moment HMRC will typically use the 2023-24 data for 2023-24 and 2024-25 and will also use it for 2025-26 in due course.

But if a bank reported interest for 2022-23 and hasn't reported anything for that account for 2023-24, or maybe have reported it for 2023-24 but under a different account number, then HMRC will still have estimate(s) for 2023-24 and that is what the guidance I linked to seems to be resolving.

So maybe it's HMRC process that is delayed rather than the banks doing something wrong? 

eskbanker

Dazed_and_C0nfused said:

SiliconChip said:

eskbanker said:

SiliconChip said:

The accompanying text says that the calculation is usually done between June and October, as it's the last day of October and there's been no communication from HMRC that deadline has probably been missed.

I don't think saying that something is "usually done between June and October" constitutes a deadline of the end of October!  I'm pretty sure I've seen others on this board reporting the same lack of visible progress though, but don't believe there's any obligation on HMRC to provide a running commentary on when it'll be completed.

Deadline is probably the wrong term to use, but given this has been happening for a few years now you'd have thought that the banks and HMRC would have got the process running smoothly enough to have everything done by the end of October. The "no communication" comment was in reference to not having had an email from HMRC yet to tell me to check my personal tax account, which is what I got last year on 6th October, rather than an expectation that they'd tell me it hadn't been done.

If the issue is what @Dazed_and_C0nfused has suggested then shouldn't HMRC be banging on the door of the tardy banks to ensure that they provide the data in a timely fashion, and issuing the appropriate penalties if they fail to do so?

https://www.gov.uk/guidance/bank-and-building-society-interest-returns#submitting-your-return

I'm not sure that always is the issue?

If a bank reports interest for one tax year HMRC assume (rightly or wrongly) that the same interest will be received for the following tax year. 

This is how they estimate the interest for the current tax year, and for the forthcoming tax year when their annual tax code process takes place.

So at the moment HMRC will typically use the 2023-24 data for 2023-24 and 2024-25 and will also use it for 2025-26 in due course.

But if a bank reported interest for 2022-23 and hasn't reported anything for that account for 2023-24, or maybe have reported it for 2023-24 but under a different account number, then HMRC will still have estimate(s) for 2023-24 and that is what the guidance I linked to seems to be resolving.

So maybe it's HMRC process that is delayed rather than the banks doing something wrong? 

But surely the issue here is the definitive calculation of taxable income, and resultant liability, for the previous tax year, rather than the calibration of codes for current and next years, where it's valid (and indeed unavoidable) to use estimated figures when driving provisional PAYE deductions?

Dazed_and_C0nfused

eskbanker said:

Dazed_and_C0nfused said:

SiliconChip said:

eskbanker said:

SiliconChip said:

The accompanying text says that the calculation is usually done between June and October, as it's the last day of October and there's been no communication from HMRC that deadline has probably been missed.

I don't think saying that something is "usually done between June and October" constitutes a deadline of the end of October!  I'm pretty sure I've seen others on this board reporting the same lack of visible progress though, but don't believe there's any obligation on HMRC to provide a running commentary on when it'll be completed.

Deadline is probably the wrong term to use, but given this has been happening for a few years now you'd have thought that the banks and HMRC would have got the process running smoothly enough to have everything done by the end of October. The "no communication" comment was in reference to not having had an email from HMRC yet to tell me to check my personal tax account, which is what I got last year on 6th October, rather than an expectation that they'd tell me it hadn't been done.

If the issue is what @Dazed_and_C0nfused has suggested then shouldn't HMRC be banging on the door of the tardy banks to ensure that they provide the data in a timely fashion, and issuing the appropriate penalties if they fail to do so?

https://www.gov.uk/guidance/bank-and-building-society-interest-returns#submitting-your-return

I'm not sure that always is the issue?

If a bank reports interest for one tax year HMRC assume (rightly or wrongly) that the same interest will be received for the following tax year. 

This is how they estimate the interest for the current tax year, and for the forthcoming tax year when their annual tax code process takes place.

So at the moment HMRC will typically use the 2023-24 data for 2023-24 and 2024-25 and will also use it for 2025-26 in due course.

But if a bank reported interest for 2022-23 and hasn't reported anything for that account for 2023-24, or maybe have reported it for 2023-24 but under a different account number, then HMRC will still have estimate(s) for 2023-24 and that is what the guidance I linked to seems to be resolving.

So maybe it's HMRC process that is delayed rather than the banks doing something wrong? 

But surely the issue here is the definitive calculation of taxable income, and resultant liability, for the previous tax year, rather than the calibration of codes for current and next years, where it's valid (and indeed unavoidable) to use estimated figures when driving provisional PAYE deductions?

It is but until HMRC have all the relevant information they won't do that.

From 2016 to 2017 where untaxed interest has been received from Bank and Building Society information (BBSI) and uploaded on to the individuals record, the system will only reconcile once all expected BBSI information has been received for the year

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye93010

In the absence of certain information, bank and building society interest being one such situation, they appear to make a judgement call.  Which in this case is explained in my original link.

What is an unknown (and I suspect not something a front line advisor would know about to be honest) is exactly when this will happen.

eskbanker

Fair enough, I still can't really follow the trail through those documents to see any clear references to basing liabilities on estimates - the one you originally linked only refers to BBSI in the context of:

• 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.'

which reads to me like they assume no interest, rather than using an earlier estimate?

Likewise, the second document seems to suggest that missing BBSI data will only be infilled with actual figures sourced elsewhere:

Where the message 'Reconciliation cannot take place without BBSI Actuals' is shown this is due to IABD/Investment income/untaxed interest is expecting a Bank/Building Society (BBSI) upload containing untaxed interest for one or more individual bank account(s) held on the PAYE record.

Where individual bank accounts have not been updated by BBSI the year will manually reconcile where 'Actual' information has been provided by the customer or agent and records updated with the appropriate 'source'

but happy to be corrected!

Dazed_and_C0nfused

So, using 2022-23 as an example first tax year this could be the current situation.

Summer - Autumn 2023
Actual interest details have been reported for 2022-23 by all banks the op had received interest from.  Say 5 accounts each paying £200, £1,000 in total.  2022-23 tax liability is finalised.

Summer - Autumn 2023
The 2023-24 tax code is updated to use £1,000 as an estimate (this may not impact the tax code but is the interest estimate HMRC will use based on the previous tax year).  HMRC will expect interest details for 5 accounts when the banks report the data for 2023-24

Jan/Feb 2024
2024-25 tax code is calculated ready for the new tax year. £1,000 is again used as an estimate for this tax year.

Summer - Autumn 2024
Actual interest details are reported by four of the five banks that had reported interest details for 2022-23.  One bank hasn't reported anything for the fifth account.  At this point HMRC know there is say £2,000 in actual interest received plus an estimate of £200 for the account that has not had anything reported for 2023-24.

HMRC's annual reconciliation review can't take place as there is information missing for that one account.  That is where, at some point, this process kicks in and the estimate of £200 is changed to nil

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

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