Tax on interest earned

punto123

If your full time employed,  and earn over 1k (basic rate tax payer) interest on savings, am I right in thinking HMRC automatically take the interest owed out of your pay, by changing your tax code accordingly?

Middle_of_the_Road

punto123 said:

If your full time employed,  and earn over 1k (basic rate tax payer) interest on savings, am I right in thinking HMRC automatically take the interest owed out of your pay, by changing your tax code accordingly?

Yes, they adjust your code and collect the tax owed.

clairec666

Yes, you are correct. And your "interest" also includes things like the Nationwide fairer share bonus.

punto123

Do they send you a letter informing you of this, with how much you owe and how much they take each month?  Many thanks 

Dazed_and_C0nfused

punto123 said:

Do they send you a letter informing you of this, with how much you owe and how much they take each month?  Many thanks 

If you owe something you should receive a tax calculation letter (P800) later this year and the tax owed for 2024-25 will normally be collected over the course of the 2026-27 tax year.

So if paid monthly it would effectively split into 12.

Albermarle

You should get access to your online personal tax account, and then you can see better what is happening with your tax codes etc,

punto123

Dazed_and_C0nfused said:

punto123 said:

Do they send you a letter informing you of this, with how much you owe and how much they take each month?  Many thanks 

If you owe something you should receive a tax calculation letter (P800) later this year and the tax owed for 2024-25 will normally be collected over the course of the 2026-27 tax year.

So if paid monthly it would effectively split into 12.

Do you mean paid over 2025-26? Would they also give you the option to pay it off in one go , so nothing is taken from pay and tax code remains the same? Many thanks 

Dazed_and_C0nfused

punto123 said:

Dazed_and_C0nfused said:

punto123 said:

Do they send you a letter informing you of this, with how much you owe and how much they take each month?  Many thanks 

If you owe something you should receive a tax calculation letter (P800) later this year and the tax owed for 2024-25 will normally be collected over the course of the 2026-27 tax year.

So if paid monthly it would effectively split into 12.

Do you mean paid over 2025-26? Would they also give you the option to pay it off in one go , so nothing is taken from pay and tax code remains the same? Many thanks 

No, the 2025-26 tax year has already started and a new underpayment for a previous tax year would not be included in your tax code part way through the year.

It is usually a 3 year cycle, in year 2 the tax owed is quantified and then collected during year 3.

If you want to pay it off before then you can do.

Uriziel

as long you earn under 10k in interest in a year hmrc will do all of this automatically. they do send you a letter asking you to pay but if you dont they just adjust your tax code. you also only pay tax if you earn more than 1000 a year in interest

surreysaver

Uriziel said:

as long you earn under 10k in interest in a year hmrc will do all of this automatically. they do send you a letter asking you to pay but if you dont they just adjust your tax code. you also only pay tax if you earn more than 1000 a year in interest

They don't ask you to pay, they tell you they're adjusting your tax code.
It's also only more than £1k if you're a basic rate tax payer. Its £500 if you're a higher, and £0 if you're additional rate.
And if you earn less than £17,570, you can earn more than £1k before you pay tax on your interest 

RedImp_2

surreysaver said:

Uriziel said:

as long you earn under 10k in interest in a year hmrc will do all of this automatically. they do send you a letter asking you to pay but if you dont they just adjust your tax code. you also only pay tax if you earn more than 1000 a year in interest

They don't ask you to pay, they tell you they're adjusting your tax code.
It's also only more than £1k if you're a basic rate tax payer. Its £500 if you're a higher, and £0 if you're additional rate.
And if you earn less than £17,570, you can earn more than £1k before you pay tax on your interest 

I have to say last year unless my memory is failing me they sent me a ‘demand’ for the tax owed, no mention of adjusting my code.