Untaxed interest

Beeblebr0x

My wife's latest tax code notice details how HMRC worked out her tax code. There is a line for Less Untaxed Interest....£2654. Note 3 overleaf says this is an estimate of the interest she will receive during the year from banks etc. 

The vast majority of our savings are in ISAs. We have £6000 in a joint easy access account. Given that the first £1000 of investment income per person is tax free, she shouldn't be liable for tax.

How does she challenge this?

FrugaiMacDugal

Similar thread here, might help explain.

eskbanker

She can correct the figure via her online tax account.

Just to check though, is she going to be paying tax, as someone in a similar situation on another thread didn't actually incur tax even though the coding was counter-intuitive:

https://forums.moneysavingexpert.com/discussion/6611534/untaxed-interest-on-savings-and-investments

Beeblebr0x

Sorry, I don't know as I find tax difficult to understand.

Dazed_and_C0nfused

Beeblebr0x said:

Sorry, I don't know as I find tax difficult to understand.

Is it possible your wife has accounts she hasn't disclosed to you?

That tax code suggests she has taxable interest of at least £3,654 in 2023-24, the last tax year HMRC can usually use to estimate the interest for the current tax year.

Or has something changed significantly since 2023-24 with regards to her savings accounts (including joint ones)?

Beeblebr0x

No, nothing like that. The only thing that's changed is she started drawing her state pension last August. Prior to that, she wasn't earning enough from her company pension to be liable for income tax.

Dazed_and_C0nfused

Beeblebr0x said:

No, nothing like that. The only thing that's changed is she started drawing her state pension last August. Prior to that, she wasn't earning enough from her company pension to be liable for income tax.

I would say there are a couple of things to do now.

Firstly get her to log into her Personal Tax Account and find a section called My Detailed Tax Estimate, that will show the gross interest amount HMRC are using when calculating her tax code.  Probably £3,654.  £1,000 will be being taxed at 0% hence just £2,654 in her tax code.

Then double check things with your wife.  Previous experience had show interest tends to be missing rather than too much being shown so there is a fairly strong chance she has accounts you weren't aware of.

Remember the latest information supplied by banks at the moment is likely to be for 2023-24 and a lot can have changed since then.

She can always provide a more up to date estimate but understanding the original figures seems quite important here!

Beeblebr0x

My wife takes little interest in our financial affairs. I open and close accounts on her behalf, so I know she hasn't got money hidden elsewhere.

Thought it was up to taxpayers to declare their taxable income, not for HMRC to make assumptions?

flaneurs_lobster

Beeblebr0x said:

My wife takes little interest in our financial affairs. I open and close accounts on her behalf, so I know she hasn't got money hidden elsewhere.

Classic double-bluff....

2childmum2

I have this on my tax code - my only income is a pension of just under £5000. I am not expecting to earn enough interest to match the figure stated in my tax code. My daughter had it when her earnings were a similar amount and she had almost no savings.  I have phoned the tax office who just said it was done automatically but couldn't explain why. It disappeared from my daughter's code once her earnings went above her personal allowance. The lady I spoke to said it could be removed by me changing my estimated taxable income to match the standard personal allowance, but it didn't seem worth doing at the moment.
I still don't understand why it is included automatically and it has caused a lot of confusion in our household!

Albermarle

Beeblebr0x said:

My wife takes little interest in our financial affairs. I open and close accounts on her behalf, so I know she hasn't got money hidden elsewhere.

Thought it was up to taxpayers to declare their taxable income, not for HMRC to make assumptions?

HMRC have to estimate income in such circumstances, based on the previous year, otherwise many people would not pay enough tax and have to be billed later, which they would not be happy about, some would not pay etc
Only a proportion of taxpayers will be on the ball enough to inform HMRC of changes during the tax year