Tax owed due to bank acct savings interest

WSforever

Excuse my ignorance....
But when did it become a persons individual responsibility to manually pay tax on savings interest? Moreover, how would you know how much to pay back?
I have been notified by HMRC that I owe them income tax, due to my banks advising them of interest payments that I received on my savings accounts in April 2024.
I assumed that interest was taken by the bank at the time and paid directly to HMRC.
Also, my savings levels are less than they were 12-months ago so do I need to advise them there will be less in April 2025?
It kind of puts you off bothering with savings accounts.
(I'm sure this is covered elsewhere, so I appreciate any advice).

JGB1955

From 6th April 2016, building societies and banks stopped applying tax to savings interest. At that date it became your responsibility to declare any interest you earn over your personal savings allowance directly to HMRC.

FrugaiMacDugal

All interest is paid gross now, if you owe tax then your interest was over the tax free allowance.

WSforever

Many thanks - I have noticed that HMRC are assuming a similar interest payment for this coming year, which is incorrect. But how would I calculate / know how much I will receive in interest?

eskbanker

WSforever said:

Many thanks - I have noticed that HMRC are assuming a similar interest payment for this coming year, which is incorrect. But how would I calculate / know how much I will receive in interest?

You can work it out in advance from balances and interest rates, with spreadsheets or paper and pen - you can supply HMRC with a more accurate figure (via your online tax account) or just leave it all to come out in the wash, in that once all tax paid is reconciled with total liabilities after the end of the tax year, the relevant refund or bill will be issued.

Ayr_Rage

@WSforever it has always been your responsibility to ensure you pay the correct amount of tax, that's the way it is in the UK.

In the days when tax was taken at basic rate by the bank, if you were a higher rate tax payer then it was up to the recipient to declare any interest received and pay any extra tax.

Now that banks report interest to HMRC they will ask for tax due if you exceed the personal allowance.

As Michael Caine didn't say "Not a lot of people know that"

badmemory

Have you received a simple assessment, aka PA302.  In many cases the need for this has been caused by the increase in interest rates & the lack of increase in personal allowances.  It should say how much untaxed interest you have received, check this is correct.  That should be the total for that particular tax year.  Then lower down under income tax rates you should have an amount for personal savings allowance taxed at 0%.

So very basically.  Income including untaxed interest (so excl ISAs) less personal allowance, less savings allowance (either £1k or £500 normally).  Work out the tax on that figure & deduct the tax you have already paid.  That should be what you owe 3 months after the date of the letter.

This is not new it is just that so many more people are being dragged into it & this probably explains why these letters are so very late being sent out.  Mine was 6 months late & I only got that because I asked them where it was.

Sarahspangles

WSforever said:

It kind of puts you off bothering with savings accounts.

The easy way to avoid tax on savings interest is to move savings into ISAs. So if you haven’t used this year’s ISA allowance of £20k, that’s worth considering. And you get another £20k allowance on 6th April.

Interest rates on ISAs may not be as good unless they save you tax on the interest.

If you get 4% on savings but pay tax on all the savings interest you ‘really’ get 3.2%. So an ISA paying anything more than 3.2% is better.

Rusty190

eskbanker said:

WSforever said:

Many thanks - I have noticed that HMRC are assuming a similar interest payment for this coming year, which is incorrect. But how would I calculate / know how much I will receive in interest?

You can work it out in advance from balances and interest rates, with spreadsheets or paper and pen - you can supply HMRC with a more accurate figure (via your online tax account) or just leave it all to come out in the wash, in that once all tax paid is reconciled with total liabilities after the end of the tax year, the relevant refund or bill will be issued.

When do you supply that information to HMRC @eskbanker? - would I message them for example, towards the end of the tax year or as/when I receive interest from an account throughout the year?
I've stumbled, reluctantly, into this territory due to fixed joint account savings maturing post bereavement. 

Dazed_and_C0nfused

Rusty190 said:

eskbanker said:

WSforever said:

Many thanks - I have noticed that HMRC are assuming a similar interest payment for this coming year, which is incorrect. But how would I calculate / know how much I will receive in interest?

You can work it out in advance from balances and interest rates, with spreadsheets or paper and pen - you can supply HMRC with a more accurate figure (via your online tax account) or just leave it all to come out in the wash, in that once all tax paid is reconciled with total liabilities after the end of the tax year, the relevant refund or bill will be issued.

When do you supply that information to HMRC @eskbanker? - would I message them for example, towards the end of the tax year or as/when I receive interest from an account throughout the year?
I've stumbled, reluctantly, into this territory due to fixed joint account savings maturing post bereavement. 

There is little point in doing that really.

If you are waiting to the end of the year you might as well just let HMRC review things when they get the data from the banks and building societies.

And updating them every time some interest is paid is likely to drive both you and HMRC mad!

eskbanker

Rusty190 said:

eskbanker said:

WSforever said:

Many thanks - I have noticed that HMRC are assuming a similar interest payment for this coming year, which is incorrect. But how would I calculate / know how much I will receive in interest?

You can work it out in advance from balances and interest rates, with spreadsheets or paper and pen - you can supply HMRC with a more accurate figure (via your online tax account) or just leave it all to come out in the wash, in that once all tax paid is reconciled with total liabilities after the end of the tax year, the relevant refund or bill will be issued.

When do you supply that information to HMRC @eskbanker? - would I message them for example, towards the end of the tax year or as/when I receive interest from an account throughout the year?
I've stumbled, reluctantly, into this territory due to fixed joint account savings maturing post bereavement. 

The context of the above posts is working out a rough figure for interest in advance, if carrying forward last year's number has caused your current year tax code to be significantly different from what it ought to be.  You wouldn't message them, you'd go onto your online tax account and submit a more accurate figure there if the use of last year's total as the default estimate would be way out - they'd typically carry it forward like that towards the end of the calendar year (and issue revised coding notices accordingly) but it's later than that this time....