Untaxed Interest for 2025/6

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Good evening all,

I have just had my new tax code sent through by HMRC.  The tax code has been altered from C1257L to C1251L.  This is because they have calculated that I will received more than my allowed interest to the tune of £52.  This, at 20%, implies my income tax will rise by £10.40 over the financial year.

However, I will be getting very little in interest this year for 2 reasons.
1)  I have moved a large portion of my savings into an S&S ISA.  I did this 3-4 months ago
2)  Interest rates are subsiding
3)  And most important, my only interest will be on an account that holds £7000 because I have also had unexpected costs as a result of bad workmanship on a kitchen, a new boiler, and a family holiday.

My question is, do I ask HMRC to correct this now?  Or, do I wait for them to correct it for the next tax year (either a small rebate or a different tax code in 2026-7)?

Many Thanks

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eskbanker

Entirely up to you - you can update your expected savings interest income via your online personal tax account, but if you don't then it'll sort itself out later on with no effort needed from you.  Many wouldn't bother for a tenner, but one or two more zeroes would obviously be more significant....

ad1927

eskbanker said:

Entirely up to you - you can update your expected savings interest income via your online personal tax account, but if you don't then it'll sort itself out later on with no effort needed from you.  Many wouldn't bother for a tenner, but one or two more zeroes would obviously be more significant....

Thanks, I'll let it correct itself.  

Moleshome

Sorry to jump into your question but I've just had a similar notice that my tax code has been changed due to untaxed interest but the only interest I'm getting is from an ISA so it's presumably meant to be untaxed. I couldn't see anywhere on the personal tax account to update my income other than to tell them about additional income, are you able to guide me towards the correct section?

Thanks

eskbanker

Moleshome said:

Sorry to jump into your question but I've just had a similar notice that my tax code has been changed due to untaxed interest but the only interest I'm getting is from an ISA so it's presumably meant to be untaxed. I couldn't see anywhere on the personal tax account to update my income other than to tell them about additional income, are you able to guide me towards the correct section?

Thanks

Yes, it's that unintuitively-labelled 'add investment income' link that you need.

SVaz

Also jumping in,  my Wife’s tax code on her Sipp has just been changed to 420N from 427N) 
She’s requested a drawdown payment of £4200 that will be paid at the end of this month and she updated her tax account with that amount. 

Will the payment be taxed ( at what rate?) and then have to be reclaimed?   

She pays no tax via PAYE, her code is 696T ( I’m her employer) . 
 

She will also take £4200 after April 5th and her tax account says her tax code will be 393N for 25-26,  ( her PAYE tax code stays exactly the same )  so will she be taxed / reclaim slightly more next time?  

I know it’s to do with savings interest but she’s under the allowance so we’re both a bit puzzled how it all works , given that it says she has a tax free allowance of £10800 next year,  does it just mean that her savings interest is taxed at 0% ?  

molerat

Are those drawdown the taxable amounts ?

If the payment is before March 6th she will pay £55.40 tax

The April payment will attract £920.06 tax.

The simplest way to square the tax is by taking a drawdown in March

HMRC often deduct untaxed interest from the spare allowance but that alone does not mean that tax will be deducted because of it.   If her income exceeds that coded allowance then she needs to adjust the estimates for each source. She would have at least £1000 interest taxed at 0% but could also be entitled to some of the additional £5000 personal savings allowance.

SVaz

Thanks.  Yes it’s the taxable amounts.
First £4200 is from drawdown pot, already requested as she didn’t want to leave it till March 28th, she’s putting it in this year’s ISA. 

Second payment will be £1600 drawdown and £3500 UFPLS. 

She could leave the 2nd until March 2026 but wanted to get it in a trading 212 cash ISA that she’s just opened,  she’s already selling the funds .