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

JamesRobinson48

He wasDazed_and_C0nfused said:

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?

Dad filed an unsolicited return which HMRC had not requested. He did so because he thought this would be required given his >£10k interest income. He had an existing UTR code, issue to him some years back, and therefore did not need to register afresh for SA.

Barkin

fuzzzzy said:

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.

I'm in the same boat. Paid outstanding tax for 23/24 in Jan 25.
Change of tax code notice in Feb 25.

My online account still shows the outstanding amount not paid.

I guess I'll have to call 'em   😭

TheTelltaleChart

I don't know whether it makes a difference that it's an unsolicited return.

However, there are 2 boxes on the return which you can tick to discourage HMRC from collecting tax via tax code adjustments. Under the heading "If you have not paid enough tax" (on a 2023–24 return):

Box 2: If you owe less than £3,000 for the 2023–24 tax year
(excluding Class 2 NICs) and you send us your paper
tax return by 31 October, or 30 December 2024 if you
file online, we’ll try to collect the tax through your
wages or pension by adjusting your 2025–26 tax code.
If you do not want us to do this, put ‘X’ in the box

Box 3: If you owe tax on savings, casual earnings and/or
the High Income Child Benefit Charge for the 2024–25
tax year, we’ll try to collect it through your wages or
pension by adjusting your 2024–25 tax code.
If you do not want us to do this, put ‘X’ in the box

masonic

The option exists for those of us filling compulsory returns too. I always opt to pay what I owe rather than have my tax code adjusted.

maman

masonic said:

The option exists for those of us filling compulsory returns too. I always opt to pay what I owe rather than have my tax code adjusted.

I think what's taken many people (including me) by surprise is that they paid what they owed but their tax code changed anyway. 

This seems to be because the money owed was because of savings interest. HMRC then assumed you'll get the same in this year and adjust the code accordingly.

I'm told you can adjust the estimated increased income for the current year if you think HMRC's estimate is likely to be inaccurate. 

soulsaver

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? 

Exactly this happened to me via 'Simple Assessment' early March.

I challenged it (50 minutes on phone, mostly on fob off hold) as it had missed the c.£2k payment I'd made in December regarding the 23/24 savings interest.

HMRC agent said it was an error and the 2 parts of the system, paye & SA, 'weren't talking to each other..' and they'd issue a correction. I have his name & contemporaneous notes.

To their credit they did issue a corrective statement online.

However, this is where it gets frustrating: A week ago I had an email telling me to look at my account: They've reinstated essentially the same simple assessment again, with just date changes. And it says it supersedes any prior assessment and I must pay by July something.

The £2k I paid is omitted again from the calcs and now there is no record of the prior assessment being rescinded.

Grrr.

masonic

maman said:

masonic said:

The option exists for those of us filling compulsory returns too. I always opt to pay what I owe rather than have my tax code adjusted.

I think what's taken many people (including me) by surprise is that they paid what they owed but their tax code changed anyway.
This seems to be because the money owed was because of savings interest. HMRC then assumed you'll get the same in this year and adjust the code accordingly.
I'm told you can adjust the estimated increased income for the current year if you think HMRC's estimate is likely to be inaccurate. 

I think that depends how much tax you owe when the return is submitted. If it is above a threshold you get a request to make a payment on account for the following year if you decline to have your tax code adjusted. I've not been in that boat as the tax I owe has always been below the threshold.

While I have a figure for other untaxed income on my PTA, it has never been factored into my tax code calculation. Perhaps this happens above a threshold.

JamesRobinson48

soulsaver said:

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? 

Exactly this happened to me via 'Simple Assessment' early March.

I challenged it (50 minutes on phone, mostly on fob off hold) as it had missed the c.£2k payment I'd made in December regarding the 23/24 savings interest.

HMRC agent said it was an error and the 2 parts of the system, paye & SA, 'weren't talking to each other..' and they'd issue a correction. I have his name & contemporaneous notes.

To their credit they did issue a corrective statement online.

However, this is where it gets frustrating: A week ago I had an email telling me to look at my account: They've reinstated essentially the same simple assessment again, with just date changes. And it says it supersedes any prior assessment and I must pay by July something.

The £2k I paid is omitted again from the calcs and now there is no record of the prior assessment being rescinded.

Grrr.

Thanks for this.

One point I gathered so far is that Dad should on no account submit an unsolicited Self Assessment just because his interest income exceeds £10k. In this scenario, he should submit a SA only if HMRC directly asks him.

FYI, Dad's taxable income for the 2024/25 tax year is almost £90k and comprises only UK pensions and UK interest income. So his income sources are very straightforward, and highly visible to HMRC, even though the amounts are fairly substantial.

For the 2024/25 tax year, by Oct/Nov 2025 HMRC will surely spot that Dad's interest income is ~£18k higher than it was for 2023/24 (£30k vs £12k), and therefore that there is an underpayment of at least £7k income tax not collected through PAYE (it's all taxable at 40%).  With figures of that magnitude, will HMRC inevitably ask Dad to submit a SA?  Possibly payments on account of 2025/26 will also be required?  Supposing HMRC puts Dad into SA of their own volition, is that likely to mean that the P800 process will fall away?  Alternatively, is it probable that HMRC will put Dad into a 'Simple Assessment' process instead of SA? Or indeed, might they just continue to leave him in P800?

1spiral

JamesRobinson48 said:

 With figures of that magnitude, will HMRC inevitably ask Dad to submit a SA? 

You might find that now he's submitted one, they will continue to request one.

I completed one voluntarily about 10 years ago when tax was deducted from interest at source as I wasn't working in order to reclaim the taxed interest.

It was a couple of years after tax stopped being deducted from interest before HMRC finally told me that I no longer needed to complete one. So I completed 1 or 2 where there was no tax to pay nor reclaim before they caught up.