Pensions, interest and tax code; help wanted!

Notepad_Phil

Sarahspangles said:

squirrelpie said:

On https://www.gov.uk/apply-tax-free-interest-on-savings the bit about registering for self assessment if interest is above £10,000 is under a heading of "If you're self-employed" but on the forum at https://community.hmrc.gov.uk/customerforums/pt/683a7777-5a47-ee11-a81c-6045bd0c0056 the HMRC people seem to be advising other people to do that as well? I'm confused.

Interesting - I think that’s recently changed. We looked at it within the last three months because OH’s interest has breached this year. I’m sure it wasn’t split into self-employed and PAYE at that point. It’s not the sort of thing I’d miss.

Hmmm, I'm pretty sure that it's changed too. Given the increase in interest rates from a few years ago then there must have been a big increase in the number of people contacting them due to this £10,000 limit, so it must be an easy win for them to now say that non-self-employed people don't need to contact them anymore.

Just looked on the Wayback Machine and it definitely has changed, no mention of only needing to register for SA if you're self employed if you look at the January version.

The https://www.gov.uk/check-if-you-need-tax-return does currently still say that you need to do a self assesment if you receive more than £10k in interest and doesn't differentiate between self-employed and pensioner/employed, but that does say it's for the 2023-24 year so maybe it will be updated when we hit April 6th.

Sarahspangles

Notepad_Phil said:

Sarahspangles said:

squirrelpie said:

On https://www.gov.uk/apply-tax-free-interest-on-savings the bit about registering for self assessment if interest is above £10,000 is under a heading of "If you're self-employed" but on the forum at https://community.hmrc.gov.uk/customerforums/pt/683a7777-5a47-ee11-a81c-6045bd0c0056 the HMRC people seem to be advising other people to do that as well? I'm confused.

Interesting - I think that’s recently changed. We looked at it within the last three months because OH’s interest has breached this year. I’m sure it wasn’t split into self-employed and PAYE at that point. It’s not the sort of thing I’d miss.

Hmmm, I'm pretty sure that it's changed too. Given the increase in interest rates from a few years ago then there must have been a big increase in the number of people contacting them due to this £10,000 limit, so it must be an easy win for them to now say that non-self-employed people don't need to contact them anymore.

Just looked on the Wayback Machine and it definitely has changed, no mention of only needing to register for SA if you're self employed if you look at the January version.

The https://www.gov.uk/check-if-you-need-tax-return does currently still say that you need to do a self assesment if you receive more than £10k in interest and doesn't differentiate between self-employed and pensioner/employed, but that does say it's for the 2023-24 year so maybe it will be updated when we hit April 6th.

I hear a lot of grumbling about the accuracy of reported interest by banks and building societies, but ours seems accurate.

I haven’t finished my coffee! I’m trying to get my head round whether this means OH will pay his tax bill for the untaxed interest earlier through a P800 issued later this Summer than if he had submitted a SA return.

Dazed_and_C0nfused

Sarahspangles said:

Notepad_Phil said:

Sarahspangles said:

squirrelpie said:

On https://www.gov.uk/apply-tax-free-interest-on-savings the bit about registering for self assessment if interest is above £10,000 is under a heading of "If you're self-employed" but on the forum at https://community.hmrc.gov.uk/customerforums/pt/683a7777-5a47-ee11-a81c-6045bd0c0056 the HMRC people seem to be advising other people to do that as well? I'm confused.

Interesting - I think that’s recently changed. We looked at it within the last three months because OH’s interest has breached this year. I’m sure it wasn’t split into self-employed and PAYE at that point. It’s not the sort of thing I’d miss.

Hmmm, I'm pretty sure that it's changed too. Given the increase in interest rates from a few years ago then there must have been a big increase in the number of people contacting them due to this £10,000 limit, so it must be an easy win for them to now say that non-self-employed people don't need to contact them anymore.

Just looked on the Wayback Machine and it definitely has changed, no mention of only needing to register for SA if you're self employed if you look at the January version.

The https://www.gov.uk/check-if-you-need-tax-return does currently still say that you need to do a self assesment if you receive more than £10k in interest and doesn't differentiate between self-employed and pensioner/employed, but that does say it's for the 2023-24 year so maybe it will be updated when we hit April 6th.

I hear a lot of grumbling about the accuracy of reported interest by banks and building societies, but ours seems accurate.

I haven’t finished my coffee! I’m trying to get my head round whether this means OH will pay his tax bill for the untaxed interest earlier through a P800 issued later this Summer than if he had submitted a SA return.

A P800 means there is nothing that he has to pay.  There may be tax owed but any payment would be voluntary with the basic principle being that it would be collected via his 2026-27 tax code.

If he received a Simple Assessment (PA302) then the earliest the tax needs to be paid is 31 January 2026 (later if the PA302 is issued within 3 months of 31 January 2026).

Sarahspangles

Dazed_and_C0nfused said:

I hear a lot of grumbling about the accuracy of reported interest by banks and building societies, but ours seems accurate.

I haven’t finished my coffee! I’m trying to get my head round whether this means OH will pay his tax bill for the untaxed interest earlier through a P800 issued later this Summer than if he had submitted a SA return.

A P800 means there is nothing that he has to pay.  There may be tax owed but any payment would be voluntary with the basic principle being that it would be collected via his 2026-27 tax code.

If he received a Simple Assessment (PA302) then the earliest the tax needs to be paid is 31 January 2026 (later if the PA302 is issued within 3 months of 31 January 2026).

Thank you. They recently issued him with a new notice of coding for 2024/25, to recover underpayment in 2023/24 from his pension (PAYE). I find it difficult to get my head round how many years’ underpayment can impact his code in a single tax year. Presumably he’ll start 2025/26 with a deduction to (provisionally) take the same amount for untaxed interest in 2025/26, but this will be revised upwards when they finalise his taxes for 2024/25. But the underpayment for 2024/25 won’t actually be collected until 2026/27.

The amounts are significant for us because he had a PCLS and inheritance in the same tax year. As I’m retiring I can draw less from my SIPP in 2025/26 than I initially planned, and use the starter savings band against joint interest. I guess we’ll need to amend the expected interest figures in both personal tax accounts.

Dazed_and_C0nfused

Sarahspangles said:

Dazed_and_C0nfused said:

I hear a lot of grumbling about the accuracy of reported interest by banks and building societies, but ours seems accurate.

I haven’t finished my coffee! I’m trying to get my head round whether this means OH will pay his tax bill for the untaxed interest earlier through a P800 issued later this Summer than if he had submitted a SA return.

A P800 means there is nothing that he has to pay.  There may be tax owed but any payment would be voluntary with the basic principle being that it would be collected via his 2026-27 tax code.

If he received a Simple Assessment (PA302) then the earliest the tax needs to be paid is 31 January 2026 (later if the PA302 is issued within 3 months of 31 January 2026).

Thank you. They recently issued him with a new notice of coding for 2024/25, to recover underpayment in 2023/24 from his pension (PAYE). I find it difficult to get my head round how many years’ underpayment can impact his code in a single tax year. Presumably he’ll start 2025/26 with a deduction to (provisionally) take the same amount for untaxed interest in 2025/26, but this will be revised upwards when they finalise his taxes for 2024/25. But the underpayment for 2024/25 won’t actually be collected until 2026/27.

The amounts are significant for us because he had a PCLS and inheritance in the same tax year. As I’m retiring I can draw less from my SIPP in 2025/26 than I initially planned, and use the starter savings band against joint interest. I guess we’ll need to amend the expected interest figures in both personal tax accounts.

I think the bit highlighted in bold is extremely unlikely.

It can be hard to keep track of underpayment elements but including an underpayment from 2023-24 in a 2024-25 tax code for the first time after the tax year (2024-25) has started is very unusual.  Basically it shouldn't happen.

Untaxed interest is usually estimated based on the last year banks have reported for.  So at the moment you could expect 2024-25 and 2025-26 tax codes to be based on the interests details from 2023-24.

You can usually see the gross untaxed interest amount (which is often different to the tax code deduction) if you can find your way to the View Detailed Income Tax Estimate page in the tax code part of your Personal Tax Account.
NB. Once on the correct screen it is titled Your detailed PAYE Income Tax estimate