Tax code change due to savings income - pay off now or just leave it?

Albermarle

Dazed_and_C0nfused said:

maman said:

Sorry @Dazed_and_C0nfused, you're right that HMRC have made the estimate that I will get similar interest in the coming year and have adjusted my tax code accordingly . However as I no longer have this level of savings (due to spending on my home) then I know it won't be the case.

You have two options then,

1). Leave well along and simply wait for the 2024-25 year to be reviewed at which point any tax overpaid will be refunded to you.

https://www.gov.uk/tax-overpayments-and-underpayments

2). Try and call HMRC now and provide them with your own estimate of the interest to be received in the current tax year so they can update your CY tax code.

Only you know if 2) is worth the effort!

Can you not change ‘estimated other income including interest’ on line in your personal tax account?

Dazed_and_C0nfused

Albermarle said:

Dazed_and_C0nfused said:

maman said:

Sorry @Dazed_and_C0nfused, you're right that HMRC have made the estimate that I will get similar interest in the coming year and have adjusted my tax code accordingly . However as I no longer have this level of savings (due to spending on my home) then I know it won't be the case.

You have two options then,

1). Leave well along and simply wait for the 2024-25 year to be reviewed at which point any tax overpaid will be refunded to you.

https://www.gov.uk/tax-overpayments-and-underpayments

2). Try and call HMRC now and provide them with your own estimate of the interest to be received in the current tax year so they can update your CY tax code.

Only you know if 2) is worth the effort!

Can you not change ‘estimated other income including interest’ on line in your personal tax account?

You can, but there is nothing I can see which allows you to include details for each individual bank account.

And plenty of people posting on here have reported needing to provide that level of detail when phoning HMRC so I'm not convinced that it is simple as telling HMRC the current year total is likely to be say £800 via your Personal Tax Account.

But maybe it is?

maman

Thanks for your help. I think I'll leave it and get any due refund next year. It would be difficult to make an estimate as I'm hoping to restore at least some of my savings and who knows what will happen to interest rates. 

wiseonesomeofthetime

The difficulty that may arise by allowing HMRC to mess with your tax code, is if you do zero-based budgeting, like me.

I got mine settled so that I did not have to mess around with my budget, albeit I would only have to do it once of course, but it's just the way my mind works. I like things tidy and messing with tax codes and estimating future interest is not tidy to me.

I found the guy who answered my call at HMRC very helpful. It is possible you may get a good CS too.

The 'hold' was twenty-odd minutes IIRC, but just allow an hour free time and go for it, perhaps.

Hoenir

Dazed_and_C0nfused said:

Albermarle said:

Dazed_and_C0nfused said:

maman said:

Sorry @Dazed_and_C0nfused, you're right that HMRC have made the estimate that I will get similar interest in the coming year and have adjusted my tax code accordingly . However as I no longer have this level of savings (due to spending on my home) then I know it won't be the case.

You have two options then,

1). Leave well along and simply wait for the 2024-25 year to be reviewed at which point any tax overpaid will be refunded to you.

https://www.gov.uk/tax-overpayments-and-underpayments

2). Try and call HMRC now and provide them with your own estimate of the interest to be received in the current tax year so they can update your CY tax code.

Only you know if 2) is worth the effort!

Can you not change ‘estimated other income including interest’ on line in your personal tax account?

You can, but there is nothing I can see which allows you to include details for each individual bank account.

And plenty of people posting on here have reported needing to provide that level of detail when phoning HMRC so I'm not convinced that it is simple as telling HMRC the current year total is likely to be say £800 via your Personal Tax Account.

But maybe it is?

It's that simple. Merely update with a single figure. 

Easy to do if you maintain your own records as the information becomes available. 

Teesmouth

I'm in a similar circumstance for the first time, for tax year '23-'24 I had interest that went over the £1000 allowance, I finally got a notification, after web portal constantly saying 'your tax is been calculated', that I hadn't payed enough tax on Dec 31st '24. I paid this in full the same day.

Forward to Jan 25th '25 and I get a further notice to say my tax code is being changed from 1257L to 975LX from the 23rd Jan '25 which has just missed our payroll run for this month.

It looks like they have crystal balled that I'd be earning the same amount of interest for 24-25 and used this to alter the tax code to collect for x amount of months for the 24-25 tax year?

I'm assuming my tax code would change back to 1257L after this point and any further tax to be collected/refunded sorted later this year?

I'm inclined to leave it and see what happens in the next few months, though  I'd prefer to just pay the tax from savings when its presented as a single payment rather than fiddling with tax codes.

horsewithnoname

In the absence of any more accurate information then the restriction in your code will be the same as the previous year. How do you expect HMRC to know what you might add to or spend from your savings or what interest rates might do? If you have a more accurate figure, then update it. 

Dazed_and_C0nfused

Teesmouth said:

I'm in a similar circumstance for the first time, for tax year '23-'24 I had interest that went over the £1000 allowance, I finally got a notification, after web portal constantly saying 'your tax is been calculated', that I hadn't payed enough tax on Dec 31st '24. I paid this in full the same day.

Forward to Jan 25th '25 and I get a further notice to say my tax code is being changed from 1257L to 975LX from the 23rd Jan '25 which has just missed our payroll run for this month.

It looks like they have crystal balled that I'd be earning the same amount of interest for 24-25 and used this to alter the tax code to collect for x amount of months for the 24-25 tax year?

I'm assuming my tax code would change back to 1257L after this point and any further tax to be collected/refunded sorted later this year?

I'm inclined to leave it and see what happens in the next few months, though  I'd prefer to just pay the tax from savings when its presented as a single payment rather than fiddling with tax codes.

No, the same figure will be used again when calculating your 2025-26 tax code.

Once the actual details are received for 2024-25 will be reviewed and you would be notified of any overpayment or underpayment.

At which point your 2025-26 code is usually updated to use the actual details for 2024-25 as the estimate, replacing the estimate based on 2023-24.

Dazed_and_C0nfused

Hoenir said:

Dazed_and_C0nfused said:

Albermarle said:

Dazed_and_C0nfused said:

maman said:

Sorry @Dazed_and_C0nfused, you're right that HMRC have made the estimate that I will get similar interest in the coming year and have adjusted my tax code accordingly . However as I no longer have this level of savings (due to spending on my home) then I know it won't be the case.

You have two options then,

1). Leave well along and simply wait for the 2024-25 year to be reviewed at which point any tax overpaid will be refunded to you.

https://www.gov.uk/tax-overpayments-and-underpayments

2). Try and call HMRC now and provide them with your own estimate of the interest to be received in the current tax year so they can update your CY tax code.

Only you know if 2) is worth the effort!

Can you not change ‘estimated other income including interest’ on line in your personal tax account?

You can, but there is nothing I can see which allows you to include details for each individual bank account.

And plenty of people posting on here have reported needing to provide that level of detail when phoning HMRC so I'm not convinced that it is simple as telling HMRC the current year total is likely to be say £800 via your Personal Tax Account.

But maybe it is?

It's that simple. Merely update with a single figure. 

Easy to do if you maintain your own records as the information becomes available. 

And is your tax code then updated straight away (assuming you have an ongoing pension or employment)?

BreakingGlass

Dazed_and_C0nfused said:

It is a little unusual that so many people are reporting that updated 2024-25 tax codes are happening before 2023-24 is finalised.

Yes I found this strange!

I submitted a Tax Return (my first for about 5 years) in June 2024 because I had over £10k savings interest in the 2023/24 Tax Year.  At the time, my calculation showed that there was no tax to pay (I have no other taxable income).
When submitting my return, I ticked the box to say that I did not want them to collect any tax due via my 2025/26 Tax Code.

On logging in to HMRC, I still get the following message (my italics):

Your Income Tax has not been calculated yet for 6 April 2023 to 5 April 2024

---

There is no need for you to contact HMRC about this.

We aim to calculate your Income Tax by 5 April 2025. Your Income Tax will be updated when that happens.

However, on 31 Dec 24 HMRC changed my Tax Code to 56L, with an explanation to say that 'we changed your Tax Code because your Untaxed interest on savings and investments has been increased from £7,132 to £12,001.'

From my records, the £7,132 figure was their estimate of my interest for 2022/23 (it was actually about £1500 more).  Hence it would appear that they have adjusted my current tax code based on what Banks/Building societies have reported for 2023/24.  I am hoping that when they eventually process my 2023/24 Tax Return they will see that I do not want any income tax due collected via my Tax Code, and revert my code to 1257L prior to Tax Year 2025/26.