Tax on bank account interest (2023-2024) - applied for a second time despite being paid.

Vinny531

I wonder if there is anyone else  has found that tax on interest on bank accounts (2023-2024), has been applied for a second time, even though it has been paid and their tax return shows that bank interest has been calculated correctly in the first place.

I normally pay tax through self assessment (I receive a bill), but last May (2024) it appear as a change in PAYE (tax code). After a conversation with PAYE it was applied to self assessment as a bill. However, despite the tax being paid, I received an email recently stating my tax code had changed. This is for unpaid tax on interest from bank accounts. As mentioned earlier it has been paid for some time.

Dazed_and_C0nfused

Vinny531 said:

I wonder if there is anyone else  has found that tax on interest on bank accounts (2023-2024), has been applied for a second time, even though it has been paid and their tax return shows that bank interest has been calculated correctly in the first place.

I normally pay tax through self assessment (I receive a bill), but last May (2024) it appear as a change in PAYE (tax code). After a conversation with PAYE it was applied to self assessment as a bill. However, despite the tax being paid, I received an email recently stating my tax code had changed. This is for unpaid tax on interest from bank accounts. As mentioned earlier it has been paid for some time.

I suspect you are getting confused with how HMRC update tax codes.

They would never include 2023-24 interest in your 2025-26 tax code.  But they would include an estimate of interest for 2025-26 which could well be the same amount as that from 2023-24.

They could also include tax owed from 2023-24 in your 2025-26 tax code.

What is the deduction in your tax code you are questioning called?

Vinny531

Thanks for your comment. But the tax code change is for tax on interest for 2023-2024. However, it has been paid. I am very worried about this. Last May (2024) my accountant submitted my tax return with bank interest and HMRC still changed my tax code despite the fact that I always pay through a bill. It took a bit of sorting out. Thanks again.

Dazed_and_C0nfused

Vinny531 said:

Thanks for your comment. But the tax code change is for tax on interest for 2023-2024. However, it has been paid. I am very worried about this. Last May (2024) my accountant submitted my tax return with bank interest and HMRC still changed my tax code despite the fact that I always pay through a bill. It took a bit of sorting out. Thanks again.

I can honestly say I have never ever known HMRC include interest from one tax year in the tax code of a different year.

The same amount as an estimate yes but that is not the 2023-24 interest.

Or do you mean your tax code includes an underpayment?

WindfallWendy

I am wondering if I am in a similar position.

I am employed.
I had a rental property generating income (sold Oct 2024)

I did my tax return in Sept 2024 and ended up with a tax refund due to a big (£8k)one off pension payment I made at the end of the tax year via my employer investment builder.
After selling the rental property, I told HMRC that I won't receive income from property any more.

However my tax code has changed to suggest my tax free amount is less than £9k (C849L or something like that).

I've just drafted my tax return for 24/25 and again, I think I'm due a refund (another deposit into pension), but I'm not sure how to understand the reasoning behind my tax code change. Will they explain it to me if I ask them? (that feels like a stupid question.... But I'll ask it anyway!).

Dazed_and_C0nfused

WindfallWendy said:

I am wondering if I am in a similar position.

I am employed.
I had a rental property generating income (sold Oct 2024)

I did my tax return in Sept 2024 and ended up with a tax refund due to a big (£8k)one off pension payment I made at the end of the tax year via my employer investment builder.
After selling the rental property, I told HMRC that I won't receive income from property any more.

However my tax code has changed to suggest my tax free amount is less than £9k (C849L or something like that).

I've just drafted my tax return for 24/25 and again, I think I'm due a refund (another deposit into pension), but I'm not sure how to understand the reasoning behind my tax code change. Will they explain it to me if I ask them? (that feels like a stupid question.... But I'll ask it anyway!).

You can see the breakdown of how the 849 element has been arrived at in your Personal Tax Account.

If you aren't sure what it means then post the details so it can be explained.

badmemory

Are you still filing self assessment?  If you are then the tax you have paid via PAYE will reduce any tax due to be paid via the self assessment so this should not be a problem.

fuzzzzy

Vinny531 said:

I wonder if there is anyone else  has found that tax on interest on bank accounts (2023-2024), has been applied for a second time, even though it has been paid and their tax return shows that bank interest has been calculated correctly in the first place.

I normally pay tax through self assessment (I receive a bill), but last May (2024) it appear as a change in PAYE (tax code). After a conversation with PAYE it was applied to self assessment as a bill. However, despite the tax being paid, I received an email recently stating my tax code had changed. This is for unpaid tax on interest from bank accounts. As mentioned earlier it has been paid for some time.

I had something similar happen. I received a tax code notice in February 2025 that said I had an under payment for 2023-2024 despite having paid the tax I owed for bank savings interest in my self assessment in January 2025. I had to phone HMRC up to get it removed from the calculation.

Qyburn

WindfallWendy said:

I've just drafted my tax return for 24/25 and again, I think I'm due a refund (another deposit into pension), but I'm not sure how to understand the reasoning behind my tax code change. Will they explain it to me if I ask them? (that feels like a stupid question.... But I'll ask it anyway!).

I suspect there'll be a tax code change after your return is submitted.

JamesRobinson48

My father (93) has the same problem. Unfortunately, this shows no sign of sorting itself out within HMRC’s processes.

In June 2024 Dad filed a SA tax return for 2023/24. He submitted this (his first SA for several years) because his interest income had increased to a level exceeding £10k.  He immediately paid HMRC the income tax due, ~£2600. Dad assumed that by submitting through SA and paying the tax due, HMRC would remove him from the ‘P800’ process, which they were previously using to true up his income taxes via PAYE.

However, then in March 2025 HMRC sent Dad a P800 letter, stating that he owes £2117 for the 2023/24 year. This is due to his interest income for 2023/24 (i.e. figures HMRC collected from the banks) being higher than the corresponding interest income amount for 2022/23.  On the same day Dad also received a tax code notice, stating that the £2117 “underpayment” will be collected through PAYE on his pension during the 2025/26 tax year.

Oddly, HMRC’s P800 letter and tax coding notice in March 2025 completely ignored both the SA which he had submitted in June 2024, and the £2600 SA income tax that he had paid at that time. Incidentally, several of the figures in the P800 letter are erroneous, for example the bank interest is ~£1000 understated (looks like one bank might have failed to notify HMRC).

So it looks to me as if HMRC’s processes for SA and P800 don’t communicate or reconcile with each other at all, even after a gap of nine months. In consequence, Dad is asked to pay duplicated income tax on the same interest income.  Unfortunately, Dad is now too frail to phone HMRC or initiate a resolution himself.

Dad’s problem could soon get much larger. For the 2024/25 tax year his interest income has increased to £30k. And I observe from HMRC’s online guidance (now updated for 2024/25) that SA is still required where interest exceeds £10k.

https://www.gov.uk/check-if-you-need-tax-return

I know there are experts on this thread. Please would someone advise if Dad could expect HMRC to sort this out themselves or, if not, what action he should take?  Should we write to HMRC pointing out their error?  Meanwhile, should Dad go ahead and submit an SA for 2024/25 (declaring £30k interest income), in the hope of prompting HMRC to take him out of P800?  Or might he do better to wait until early 2026? By that time, presumably, HMRC will have spotted the £30k interest themselves, and then send him a P800 letter for 2024/25 and/or write asking him to submit an SA within 90 days? 

Dazed_and_C0nfused

JamesRobinson48 said:

My father (93) has the same problem. Unfortunately, this shows no sign of sorting itself out within HMRC’s processes.

In June 2024 Dad filed a SA tax return for 2023/24. He submitted this (his first SA for several years) because his interest income had increased to a level exceeding £10k.  He immediately paid HMRC the income tax due, ~£2600. Dad assumed that by submitting through SA and paying the tax due, HMRC would remove him from the ‘P800’ process, which they were previously using to true up his income taxes via PAYE.

However, then in March 2025 HMRC sent Dad a P800 letter, stating that he owes £2117 for the 2023/24 year. This is due to his interest income for 2023/24 (i.e. figures HMRC collected from the banks) being higher than the corresponding interest income amount for 2022/23.  On the same day Dad also received a tax code notice, stating that the £2117 “underpayment” will be collected through PAYE on his pension during the 2025/26 tax year.

Oddly, HMRC’s P800 letter and tax coding notice in March 2025 completely ignored both the SA which he had submitted in June 2024, and the £2600 SA income tax that he had paid at that time. Incidentally, several of the figures in the P800 letter are erroneous, for example the bank interest is ~£1000 understated (looks like one bank might have failed to notify HMRC).

So it looks to me as if HMRC’s processes for SA and P800 don’t communicate or reconcile with each other at all, even after a gap of nine months. In consequence, Dad is asked to pay duplicated income tax on the same interest income.  Unfortunately, Dad is now too frail to phone HMRC or initiate a resolution himself.

Dad’s problem could soon get much larger. For the 2024/25 tax year his interest income has increased to £30k. And I observe from HMRC’s online guidance (now updated for 2024/25) that SA is still required where interest exceeds £10k.

https://www.gov.uk/check-if-you-need-tax-return

I know there are experts on this thread. Please would someone advise if Dad could expect HMRC to sort this out themselves or, if not, what action he should take?  Should we write to HMRC pointing out their error?  Meanwhile, should Dad go ahead and submit an SA for 2024/25 (declaring £30k interest income), in the hope of prompting HMRC to take him out of P800?  Or might he do better to wait until early 2026? By that time, presumably, HMRC will have spotted the £30k interest themselves, and then send him a P800 letter for 2024/25 and/or write asking him to submit an SA within 90 days? 

Did he register for Self Assessment or simply file an unsolicited return HMRC hadn't, at that time, requested?