HMRC over estimate of untaxed interest

eskbanker

missymouse said:

I’m in a similar boat, it is hard to speak to anyone and my personal allowance before I pay tax has been reduced by around £500 and my tax code has changed

is that how they claw back the tax?

my ISA is full and I can’t pay anymore into works pension.

Yes, as above, tax code adjustments are used to collect tax considered to be owed.  Do you have reason to believe that the figures they're using are wrong?

missymouse

I don’t know tbh.  This is for 23/24.

I’m assuming the banks/BE give accurate information but I’m not really understanding exactly how it works.  Wish I’d kept more accurate records

if I’m £500 over in interest do they make me pay back £100 by taxing me more each month.

how can you avoid it if your ISA is full

eskbanker

missymouse said:

I don’t know tbh.  This is for 23/24.

I’m assuming the banks/BE give accurate information but I’m not really understanding exactly how it works.  Wish I’d kept more accurate records

if I’m £500 over in interest do they make me pay back £100 by taxing me more each month.

how can you avoid it if your ISA is full

Yes, if your interest exceeds your various allowances by £500 then that would result in a £100 tax liability that'll generally be collected by tax code adjustment - the onus is primarily on you to keep track of your interest income but you can ask HMRC for a breakdown if you've failed to do so.

You can avoid tax on interest by earning less interest but that's hardly productive!  If you've fully used your ISA allowance then alternative options could include workplace pension contributions or even premium bonds (you'd need to work out whether that would be to your benefit rather than assuming that tax-free is automatically better than taxable).

missymouse

Could I also gift money to my spouse to put in a cash ISA. Are there limits

Bookworm105

missymouse said:

Could I also gift money to my spouse to put in a cash ISA. Are there limits

yes, obviously the money is then theirs, not yours (and obviously outside the scope of tax being as it is an ISA in spouses' name)

evenasus

RG2015 said:

mpet said:

Thank you - I didn’t realise I could do that - I don’t think I have set this up, so will look into it. 

By amending my expected income, would it produce a revised tax code notice?

It is not easy to find. The way to do this is to click on “add missing investment income”. Then navigate to incorrect untaxed interest where you can insert the correct figures. You can separately do the current year and next year.

Could you tell me please, if the HMRC information still correct? I can't find the "add missing investment income" link.
I have the problem that they've overestimated my savings income tax for 2025/2026. I don't have the same savings a last year, due to purchasing a new house.

molerat

PAYE / Check current tax year.  Link is at the bottom

evenasus

When correcting HMRC estimated untaxed savings interest for 2026/2027. Do I deduct the first £1k tax free allowance from the total taxable interest I'm going to receive this finanacial year?

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81951853#Comment_81951853

No, HMRC aren't interest in interest from ISA's.

They need to know about the total of your expected taxable interest. And they will then factor in 0% rate bands you may be able to benefit from (savings starter and nil (aka PSA) rate bands).

evenasus

https://forums.moneysavingexpert.com/discussion/comment/81951874#Comment_81951874

Sorry if Ididn't make myself clear. I don't mean ISA's. I mean the taxable savings interest in has the first £1000 free of tax. So say I was going to receive £4,000 savings interest, then I would only pay tax on £3,000. In this case, would I enter the £4.000 or the £3,000 that would be subject to tax.