Tax on savings interest through PAYE

NervyBuyer

Not a 'cutting tax' question, just a tax process one. Up until 22-23 I have needed to complete a tax return. I don't need to as of 23-24, as my income is only from PAYE, is now below the threshold and my savings interest is < 10k, but I haven't yet asked HMRC to acknowledge that so I don't have to complete one.

I do have a non-trivial amount of untaxed savings interest (outside of tax wrappers). Do HMRC look at the previous tax year (i.e. 22-23) to estimate how much you should pay through your tax code, or would they already have the 23-24 data? 23-24 will be a very anomalous year because I had an unusual amount of savings in between selling/buying houses.

Would I be better off just doing the tax return for 23-24 (given I've left it so late) and then asking for acknowledgement that I don't need to do one in future? I'm a bit concerned that the tax code change will be way out for at least 2 years and I'll end up paying not enough tax for a while and then too much when it swings the other way to catch up.

Thanks!

eskbanker

NervyBuyer said:

Up until 22-23 I have needed to complete a tax return.

Have HMRC either advised you to complete your SA as before (via routine reminder), or told you that you no longer need to?

NervyBuyer

They have sent 4 billion reminder emails asking me to complete my return. I started it months ago, then realised I didn't actually need to but forgot about it at the point of trying to find out how to get them to acknowledge that.

eskbanker

At this stage I don't think you have much choice other than to complete it, unless you're optimistic that HMRC will agree otherwise within 3.5 weeks!

If you no longer need to send a tax return

You must tell HMRC if you believe you no longer need to send a tax return.

If HMRC agrees, they’ll send a letter confirming you do not need to file a return.

You may have to pay a penalty if HMRC do not agree before the Self Assessment deadline of 31 January.

https://www.gov.uk/self-assessment-tax-returns/no-longer-need-to-send-a-tax-return

NervyBuyer said:

I do have a non-trivial amount of untaxed savings interest (outside of tax wrappers). Do HMRC look at the previous tax year (i.e. 22-23) to estimate how much you should pay through your tax code, or would they already have the 23-24 data? 23-24 will be a very anomalous year because I had an unusual amount of savings in between selling/buying houses.

Would I be better off just doing the tax return for 23-24 (given I've left it so late) and then asking for acknowledgement that I don't need to do one in future? I'm a bit concerned that the tax code change will be way out for at least 2 years and I'll end up paying not enough tax for a while and then too much when it swings the other way to catch up.

HMRC should have received 2023/24 submissions by now from your savings providers, but if you'll be self-assessing then they'll accept your figures unless they choose to challenge them - they'll adjust your 2025/26 code if deemed necessary, but you always have the option of contacting them to advise realistic estimates of any income streams if you're concerned about the potential impact of using abnormal figures.