Untaxed interest on savings and investments

Bark01

I got an email from HMRC saying i owed an extra £1600 on untaxed interest on savings and investments.

Is this an estimate or fact? I brought a house in April 2024 and had a lot of money in savings up until that point and probably around £100k wasn't in ISAs so i was paying tax on a lot. Since ~April I've had £20k in an ISA and £30k in a standard savings account @4-5% interest, both with Zopa.

The message from HMRC was:

• Your Untaxed interest on savings and investments has been increased from £85 to £4,305
• we estimate you have underpaid £1,266 tax this year

• We will start to collect this amount straight away.

  To do this we have reduced your tax-free amount by £10,898. This means that you will pay more tax until 5 April 2025, so that we can collect the £1,266.00 owed.

Does that mean it'll come out of my Jan/Feb/Mar (£422) pay or is April (£316) included in that? 
Assume if they have made a mistake I'll get it back at some point next year? I've defo not made £4k in interest this year.... 

I went back and looked at the previous year 23-24, it looks like i was 5k short in that year but its suggesting i'm going to pay that back over the 12 months of the next financial year. Now I'm really confused....
This was from my 23-24 statement

Untaxed interest

You only paid tax on an estimated amount of interest of £585, but you should have paid tax on the actual amount of £4,805.

You owe

£1,693.63

Spread the tax you owe over the year

If you do not make an online payment, we will automatically take what you owe out of your wages, salary or pension. Some of what you owe will be taken each time you are paid between 6 April 2025 and 5 April 2026. You do not need to contact us to set this up.

I think i owe £1.7k from23-24 when i had a bunch of savings and that will be paid back over 12 months next year. Then they have assumed I'll be short a similar amount this year and have decided to take that back in this year. Does that sound right? How do i challenge that?

DRS1

Have you checked 22/3?  Could they be collecting for interest received in that tax year?

Dazed_and_C0nfused

Bark01 said:

I got an email from HMRC saying i owed an extra £1600 on untaxed interest on savings and investments.

Is this an estimate or fact? I brought a house in April 2024 and had a lot of money in savings up until that point and probably around £100k wasn't in ISAs so i was paying tax on a lot. Since ~April I've had £20k in an ISA and £30k in a standard savings account @4-5% interest, both with Zopa.

The message from HMRC was:

• Your Untaxed interest on savings and investments has been increased from £85 to £4,305
• we estimate you have underpaid £1,266 tax this year

• We will start to collect this amount straight away.

  To do this we have reduced your tax-free amount by £10,898. This means that you will pay more tax until 5 April 2025, so that we can collect the £1,266.00 owed.

Does that mean it'll come out of my Jan/Feb/Mar (£422) pay or is April (£316) included in that? 
Assume if they have made a mistake I'll get it back at some point next year? I've defo not made £4k in interest this year.... 

I went back and looked at the previous year 23-24, it looks like i was 5k short in that year but its suggesting i'm going to pay that back over the 12 months of the next financial year. Now I'm really confused....
This was from my 23-24 statement

Untaxed interest

You only paid tax on an estimated amount of interest of £585, but you should have paid tax on the actual amount of £4,805.

You owe

£1,693.63

Spread the tax you owe over the year

If you do not make an online payment, we will automatically take what you owe out of your wages, salary or pension. Some of what you owe will be taken each time you are paid between 6 April 2025 and 5 April 2026. You do not need to contact us to set this up.

I think i owe £1.7k from23-24 when i had a bunch of savings and that will be paid back over 12 months next year. Then they have assumed I'll be short a similar amount this year and have decided to take that back in this year. Does that sound right? How do i challenge that?

A tax calculation for 2023-24 (or earlier) is fact.  But can be changed if there is a valid reason.

A tax code for the current tax year (2024-25 at the moment) is always just an estimate, trying to collect roughly the correct tax for the tax year in question.  Meaning there is less to sort out once the tax year ends.

But if you have more upto date figures which can be used instead of HMRC's estimates then that is usually possible. 

Your three statements about the previous year (2023-24) are quite confusing though, is it £5k, £1.7k or £1,693.63 you owe?

1) I went back and looked at the previous year 23-24, it looks like i was 5k short in that year but its suggesting i'm going to pay that back over the 12 months of the next financial year. 

2) This was from my 23-24 statement

Untaxed interest

You only paid tax on an estimated amount of interest of £585, but you should have paid tax on the actual amount of £4,805.

You owe £1,693.63

3). I think i owe £1.7k from 23-24 when i had a bunch of savings and that will be paid back over 12 months next year

Bark01

Dazed_and_C0nfused said:

Bark01 said:

I got an email from HMRC saying i owed an extra £1600 on untaxed interest on savings and investments.

Is this an estimate or fact? I brought a house in April 2024 and had a lot of money in savings up until that point and probably around £100k wasn't in ISAs so i was paying tax on a lot. Since ~April I've had £20k in an ISA and £30k in a standard savings account @4-5% interest, both with Zopa.

The message from HMRC was:

• Your Untaxed interest on savings and investments has been increased from £85 to £4,305
• we estimate you have underpaid £1,266 tax this year

• We will start to collect this amount straight away.

  To do this we have reduced your tax-free amount by £10,898. This means that you will pay more tax until 5 April 2025, so that we can collect the £1,266.00 owed.

Does that mean it'll come out of my Jan/Feb/Mar (£422) pay or is April (£316) included in that? 
Assume if they have made a mistake I'll get it back at some point next year? I've defo not made £4k in interest this year.... 

I went back and looked at the previous year 23-24, it looks like i was 5k short in that year but its suggesting i'm going to pay that back over the 12 months of the next financial year. Now I'm really confused....
This was from my 23-24 statement

Untaxed interest

You only paid tax on an estimated amount of interest of £585, but you should have paid tax on the actual amount of £4,805.

You owe

£1,693.63

Spread the tax you owe over the year

If you do not make an online payment, we will automatically take what you owe out of your wages, salary or pension. Some of what you owe will be taken each time you are paid between 6 April 2025 and 5 April 2026. You do not need to contact us to set this up.

I think i owe £1.7k from23-24 when i had a bunch of savings and that will be paid back over 12 months next year. Then they have assumed I'll be short a similar amount this year and have decided to take that back in this year. Does that sound right? How do i challenge that?

A tax calculation for 2023-24 (or earlier) is fact.  But can be changed if there is a valid reason.

A tax code for the current tax year (2024-25 at the moment) is always just an estimate, trying to collect roughly the correct tax for the tax year in question.  Meaning there is less to sort out once the tax year ends.

But if you have more upto date figures which can be used instead of HMRC's estimates then that is usually possible. 

Your three statements about the previous year (2023-24) are quite confusing though, is it £5k, £1.7k or £1,693.63 you owe?

1) I went back and looked at the previous year 23-24, it looks like i was 5k short in that year but its suggesting i'm going to pay that back over the 12 months of the next financial year. 

2) This was from my 23-24 statement

Untaxed interest

You only paid tax on an estimated amount of interest of £585, but you should have paid tax on the actual amount of £4,805.

You owe £1,693.63

3). I think i owe £1.7k from 23-24 when i had a bunch of savings and that will be paid back over 12 months next year

Its from point 2) I should have paid tax on £5k (£4,805)  rather than 585 and that i tax is s 1.7k (£1,693.63).

Looks like Ill need to contact them to tell them my savings have gone into a house so they aren't there now. Seems very bad they can just assume something like that and reduce my take home by £440 for a few months. And then make me dig through pages to figure out what's gone on and who to contact.

Dazed_and_C0nfused

Bark01 said:

Dazed_and_C0nfused said:

Bark01 said:

I got an email from HMRC saying i owed an extra £1600 on untaxed interest on savings and investments.

Is this an estimate or fact? I brought a house in April 2024 and had a lot of money in savings up until that point and probably around £100k wasn't in ISAs so i was paying tax on a lot. Since ~April I've had £20k in an ISA and £30k in a standard savings account @4-5% interest, both with Zopa.

The message from HMRC was:

• Your Untaxed interest on savings and investments has been increased from £85 to £4,305
• we estimate you have underpaid £1,266 tax this year

• We will start to collect this amount straight away.

  To do this we have reduced your tax-free amount by £10,898. This means that you will pay more tax until 5 April 2025, so that we can collect the £1,266.00 owed.

Does that mean it'll come out of my Jan/Feb/Mar (£422) pay or is April (£316) included in that? 
Assume if they have made a mistake I'll get it back at some point next year? I've defo not made £4k in interest this year.... 

I went back and looked at the previous year 23-24, it looks like i was 5k short in that year but its suggesting i'm going to pay that back over the 12 months of the next financial year. Now I'm really confused....
This was from my 23-24 statement

Untaxed interest

You only paid tax on an estimated amount of interest of £585, but you should have paid tax on the actual amount of £4,805.

You owe

£1,693.63

Spread the tax you owe over the year

If you do not make an online payment, we will automatically take what you owe out of your wages, salary or pension. Some of what you owe will be taken each time you are paid between 6 April 2025 and 5 April 2026. You do not need to contact us to set this up.

I think i owe £1.7k from23-24 when i had a bunch of savings and that will be paid back over 12 months next year. Then they have assumed I'll be short a similar amount this year and have decided to take that back in this year. Does that sound right? How do i challenge that?

A tax calculation for 2023-24 (or earlier) is fact.  But can be changed if there is a valid reason.

A tax code for the current tax year (2024-25 at the moment) is always just an estimate, trying to collect roughly the correct tax for the tax year in question.  Meaning there is less to sort out once the tax year ends.

But if you have more upto date figures which can be used instead of HMRC's estimates then that is usually possible. 

Your three statements about the previous year (2023-24) are quite confusing though, is it £5k, £1.7k or £1,693.63 you owe?

1) I went back and looked at the previous year 23-24, it looks like i was 5k short in that year but its suggesting i'm going to pay that back over the 12 months of the next financial year. 

2) This was from my 23-24 statement

Untaxed interest

You only paid tax on an estimated amount of interest of £585, but you should have paid tax on the actual amount of £4,805.

You owe £1,693.63

3). I think i owe £1.7k from 23-24 when i had a bunch of savings and that will be paid back over 12 months next year

Its from point 2) I should have paid tax on £5k (£4,805)  rather than 585 and that i tax is s 1.7k (£1,693.63).

Looks like Ill need to contact them to tell them my savings have gone into a house so they aren't there now. Seems very bad they can just assume something like that and reduce my take home by £440 for a few months. And then make me dig through pages to figure out what's gone on and who to contact.

That is how tax has worked for a very long time now.

No one seems to mind much when interest rates are going up and tax codes include too little interest (when compared to the real figures)!

HMRC won't simply change the current tax year estimate but you saying £4,805 is only likely to be, say, £2,000.  You need to provide a figure for each individual bank account they are using as an estimate for this tax year.

vacheron

Dazed_and_C0nfused said:

Bark01 said:

Dazed_and_C0nfused said:

Bark01 said:

I got an email from HMRC saying i owed an extra £1600 on untaxed interest on savings and investments.

Is this an estimate or fact? I brought a house in April 2024 and had a lot of money in savings up until that point and probably around £100k wasn't in ISAs so i was paying tax on a lot. Since ~April I've had £20k in an ISA and £30k in a standard savings account @4-5% interest, both with Zopa.

The message from HMRC was:

• Your Untaxed interest on savings and investments has been increased from £85 to £4,305
• we estimate you have underpaid £1,266 tax this year

• We will start to collect this amount straight away.

  To do this we have reduced your tax-free amount by £10,898. This means that you will pay more tax until 5 April 2025, so that we can collect the £1,266.00 owed.

Does that mean it'll come out of my Jan/Feb/Mar (£422) pay or is April (£316) included in that? 
Assume if they have made a mistake I'll get it back at some point next year? I've defo not made £4k in interest this year.... 

I went back and looked at the previous year 23-24, it looks like i was 5k short in that year but its suggesting i'm going to pay that back over the 12 months of the next financial year. Now I'm really confused....
This was from my 23-24 statement

Untaxed interest

You only paid tax on an estimated amount of interest of £585, but you should have paid tax on the actual amount of £4,805.

You owe

£1,693.63

Spread the tax you owe over the year

If you do not make an online payment, we will automatically take what you owe out of your wages, salary or pension. Some of what you owe will be taken each time you are paid between 6 April 2025 and 5 April 2026. You do not need to contact us to set this up.

I think i owe £1.7k from23-24 when i had a bunch of savings and that will be paid back over 12 months next year. Then they have assumed I'll be short a similar amount this year and have decided to take that back in this year. Does that sound right? How do i challenge that?

A tax calculation for 2023-24 (or earlier) is fact.  But can be changed if there is a valid reason.

A tax code for the current tax year (2024-25 at the moment) is always just an estimate, trying to collect roughly the correct tax for the tax year in question.  Meaning there is less to sort out once the tax year ends.

But if you have more upto date figures which can be used instead of HMRC's estimates then that is usually possible. 

Your three statements about the previous year (2023-24) are quite confusing though, is it £5k, £1.7k or £1,693.63 you owe?

1) I went back and looked at the previous year 23-24, it looks like i was 5k short in that year but its suggesting i'm going to pay that back over the 12 months of the next financial year. 

2) This was from my 23-24 statement

Untaxed interest

You only paid tax on an estimated amount of interest of £585, but you should have paid tax on the actual amount of £4,805.

You owe £1,693.63

3). I think i owe £1.7k from 23-24 when i had a bunch of savings and that will be paid back over 12 months next year

Its from point 2) I should have paid tax on £5k (£4,805)  rather than 585 and that i tax is s 1.7k (£1,693.63).

Looks like Ill need to contact them to tell them my savings have gone into a house so they aren't there now. Seems very bad they can just assume something like that and reduce my take home by £440 for a few months. And then make me dig through pages to figure out what's gone on and who to contact.

That is how tax has worked for a very long time now.

A long time indeed, but this "assumption" approach, which I am amazed they are still relying on to be honest, can be both a blessing and a curse.

In my case, a surprise demand from HMRC about 20 years ago for an additional £800 of savings interest, also based on assumed (and also completely incorrect) figures, is what first piqued my interest in personal finance and tax planning.

By the time I had finished gathering all the required savings account paperwork, researching the principles of personal taxation and constructing my defence against their claim, I made a bit of a revelation regarding pension tax relief and to decided to extend my calculations back over the previous 4 years too. In doing so I managed to turn an £800 debt into a £2,200 credit, which they agreed with and refunded me...  and they have not asked me to do a tax return since!  

Over these intervening years, I have expanded on this knowledge to ensure that I have aggressively minimised the amount of income tax I have had to pay ever since.

So the path they set me on with their original claim for just £800 (based on utterly stupid assumptions) has probably resulted them losing out to the tune of hundreds of thousands of pounds over the last 2 decades! 
 

Bark01

Dazed_and_C0nfused said:

Bark01 said:

Dazed_and_C0nfused said:

Bark01 said:

I got an email from HMRC saying i owed an extra £1600 on untaxed interest on savings and investments.

Is this an estimate or fact? I brought a house in April 2024 and had a lot of money in savings up until that point and probably around £100k wasn't in ISAs so i was paying tax on a lot. Since ~April I've had £20k in an ISA and £30k in a standard savings account @4-5% interest, both with Zopa.

The message from HMRC was:

• Your Untaxed interest on savings and investments has been increased from £85 to £4,305
• we estimate you have underpaid £1,266 tax this year

• We will start to collect this amount straight away.

  To do this we have reduced your tax-free amount by £10,898. This means that you will pay more tax until 5 April 2025, so that we can collect the £1,266.00 owed.

Does that mean it'll come out of my Jan/Feb/Mar (£422) pay or is April (£316) included in that? 
Assume if they have made a mistake I'll get it back at some point next year? I've defo not made £4k in interest this year.... 

I went back and looked at the previous year 23-24, it looks like i was 5k short in that year but its suggesting i'm going to pay that back over the 12 months of the next financial year. Now I'm really confused....
This was from my 23-24 statement

Untaxed interest

You only paid tax on an estimated amount of interest of £585, but you should have paid tax on the actual amount of £4,805.

You owe

£1,693.63

Spread the tax you owe over the year

If you do not make an online payment, we will automatically take what you owe out of your wages, salary or pension. Some of what you owe will be taken each time you are paid between 6 April 2025 and 5 April 2026. You do not need to contact us to set this up.

I think i owe £1.7k from23-24 when i had a bunch of savings and that will be paid back over 12 months next year. Then they have assumed I'll be short a similar amount this year and have decided to take that back in this year. Does that sound right? How do i challenge that?

A tax calculation for 2023-24 (or earlier) is fact.  But can be changed if there is a valid reason.

A tax code for the current tax year (2024-25 at the moment) is always just an estimate, trying to collect roughly the correct tax for the tax year in question.  Meaning there is less to sort out once the tax year ends.

But if you have more upto date figures which can be used instead of HMRC's estimates then that is usually possible. 

Your three statements about the previous year (2023-24) are quite confusing though, is it £5k, £1.7k or £1,693.63 you owe?

1) I went back and looked at the previous year 23-24, it looks like i was 5k short in that year but its suggesting i'm going to pay that back over the 12 months of the next financial year. 

2) This was from my 23-24 statement

Untaxed interest

You only paid tax on an estimated amount of interest of £585, but you should have paid tax on the actual amount of £4,805.

You owe £1,693.63

3). I think i owe £1.7k from 23-24 when i had a bunch of savings and that will be paid back over 12 months next year

Its from point 2) I should have paid tax on £5k (£4,805)  rather than 585 and that i tax is s 1.7k (£1,693.63).

Looks like Ill need to contact them to tell them my savings have gone into a house so they aren't there now. Seems very bad they can just assume something like that and reduce my take home by £440 for a few months. And then make me dig through pages to figure out what's gone on and who to contact.

That is how tax has worked for a very long time now.

No one seems to mind much when interest rates are going up and tax codes include too little interest (when compared to the real figures)!

HMRC won't simply change the current tax year estimate but you saying £4,805 is only likely to be, say, £2,000.  You need to provide a figure for each individual bank account they are using as an estimate for this tax year.

Its got nought to do with interest rates though. Its the government assuming the 1 year I had in my life with really high taxable savings is going to be my norm. Then just putting it though over Christmas giving me no time to object and also in their contacts with me the right to reply is opaque to say the least. I don't even have the accounts that generated the issue anymore. I closed them down when I brought a house. 

WindfallWendy

I think I am likely to be in a similar position next year, so it does make me think I should continue to do a tax return rather than let their tax code system sort it out. I am keeping monthly tabs on the interest I'm getting across different accounts (husband and I have maxed out ISAs and Prem Bonds), so I know exactly how much I am expecting to get in and be taxed on.

However, they of course get reports from the banks - right? And this is how they know what interest anyone gets from savings accounts - right?

Therefore, I don't think they assume interest is just a default, additional income. Rather, they wait for all the banks to confirm their savings reports and then send out the bills. 

So by keeping my own records, I'm ahead of them. And by submitting my tax return in September, I beat them. Even better, I chuck my interest into my pension so they pay me some PAYE tax back. I. WIN.

(verification of my above thinking would be appreciated!!)

Bark01

FYI - I rang HMRC, took 25 minutes for them to pick up. Explained the situation (in that i had much less savings) and told them how much interest I'd been paid so far and they adjusted my tax code. Took about 5 mins on the phone and they didn't ask for any evidence. Got an email 2 working days later to say my tax code had changed.

So all is good.

Bark01

WindfallWendy said:

However, they of course get reports from the banks - right? And this is how they know what interest anyone gets from savings accounts - right?

They get an annual report from the bank l but they get them after the tax year in question has ended so you'll be in arrears. In my case they didn't action them until December.

What happened in my case was my savings tax was calculated as follows:
1) 23-24 tax was calculated in Dec 24 to be paid in 12 equal amounts over 25-26 (~£100 per month)
2) 24-25 tax was estimated based on 23-24 tax and was to be paid in 3 equal amounts in Jan25-Mar25 (~£400 per month)

I gave HMRC my own actuals for (2) and i'll now be paying 3 equal amounts of ~£100 Jan25-Mar25

In the cast of point 1 I guess you could look at it as an interest free loan of about £1200 for 2 years, so it actual pays to not inform HRMC (I think)

dmac22

I have a monthly income from app based investments that supplement my salary but have resulted in a tax recalculation / monies owing in 24/25. Can I redirect the monthly interest payments into my wife's bank account to avoid paying the higher rate 42%  on these earnings ?  My wife works part time so even with this payment her gross earnings would only attract 21% tax ..can this be done ?