Tax code change due to interest on my savings

fly-catchers

How does a tax code K171X which is £1,710 needs to be added to your pay or pension so the extra tax can be collected work? I knew that from tax year 24/25 and 25/26 I would go over the £1000 tax free threshold. Would this underpayment be from both those tax years put together? As although I went over by £47 on my two bond funds. My other savings are from 4 regular savers with interest from 5 to 8%. Each finishing with £3000 at the end of the year. Plus £4000 in an edge account earning £19 a month. My other savings are PB and two ISA which you don’t pay tax on. So not sure if this adjustment is right or not particularly if it’s just for one tax year!

eskbanker

Your coding notice (in letter form or in your online account/app) should clarify how much relates to 2024/25 and how much to 2025/26 - once they're aware that you have savings with a tax liability they'll collect prior year underpayment via PAYE but will also try to adjust coding so that you also don't underpay in the current year.

ob1kinobi

Just to add to feedback from eskbanker it seems that I was in a similar situation to you last month.

This is what I had to do to get clearer information (full disclosure) as you dont seem to be able to get all the necessary information through your HMRC login.

I logged in to HMRC (gov.uk) using my Government Gateway user name and password 

I selected PAYE to access my Personal Tax Account

I then went to the Messages 'tab' towards the top of the page.

My latest message was dated 20.11.2025, which outlined an amended Tax Code. When I clicked on the link for that message it showed me the Tax Calculation for the Current Year

Further down the page I clicked on the link titled 'Full tax calculation for MISS / MR / MRS xxxxxxx xxxxxxxxxx

This showed the interest they are charging me for in the current year.

In my case I have underpaid tax from previous year(s), and there is a compensating line which states :-

Adjustments
Plus other adjustments (followed by an amount)

There was no clear indication of where that came from (no detail).

I called up HMRC on 26.11.2025 and got through to someone who was very helpful. Sounded like a progressive young lady who was able to answer all of my questions, and organised sending me a full breakdown by post. She did say that it could take up to 14 days before I receive something. The summary and covering letter was created within 24 hours and I received it in the post on 29.11.25 (maybe I was lucky ?). 

Reviewing the content of the letter and summary, it explains that the source of information regarding interest paid to me could be either a. 'Actual - BSSI Pre Pop', b. 'Customer Actual', or c. 'Estimate C/F - BSSI Pre Pop'. An explanation for each of these three labels / categories is defined. In my case every entry of interest paid to me contained in the summary was labelled 'Actual - BSSI Pre-Pop', so no estimates.

During my discussions with the very helpful lady at HMRC she explained that my tax code change was geared to collect an underpayment of tax in the current tax year ending 05 April 2026, and I am happy with that as I would prefer that it does not overflow or carry forward into the following tax year(s).

I hope that this helps.

Steve_s1

I'm early retired, and living on SIPP and ISA, no state pension yet.

My tax code changed last month "due to £100 unpaid interest on savings". My tax code went from 1257L to 1247L. However the total interest from taxable savings is well within my £1000 allowance as a basic rate tax payer.

I called HMRC and was told that it was probably due to the low forecast income from my SIPP (?), and they promptly changed it back to 1257L.

Although I was pleased with the outcome, the conversation with HMRC left me confused...why would they make my tax code less favourable due to my low pension income?

Are HMRC now looking at your income and assuming that you must have savings and taxing you accordingly?

eskbanker

Steve_s1 said:

I'm early retired, and living on SIPP and ISA, no state pension yet.

My tax code changed last month "due to £100 unpaid interest on savings". My tax code went from 1257L to 1247L. However the total interest from taxable savings is well within my £1000 allowance as a basic rate tax payer.

I called HMRC and was told that it was probably due to the low forecast income from my SIPP (?), and they promptly changed it back to 1257L.

Although I was pleased with the outcome, the conversation with HMRC left me confused...why would they make my tax code less favourable due to my low pension income?

Are HMRC now looking at your income and assuming that you must have savings and taxing you accordingly?

If your PAYE income is less than £12,570, they notionally allocate some of that 'spare' unused allowance to income from other sources, but if this is non-PAYE income (such as savings) then it doesn't actually result in any tax being paid.  They use the previous year's savings interest income figure as an estimate for the current one, unless you advise them otherwise.

Steve_s1

eskbanker said:

Steve_s1 said:

I'm early retired, and living on SIPP and ISA, no state pension yet.

My tax code changed last month "due to £100 unpaid interest on savings". My tax code went from 1257L to 1247L. However the total interest from taxable savings is well within my £1000 allowance as a basic rate tax payer.

I called HMRC and was told that it was probably due to the low forecast income from my SIPP (?), and they promptly changed it back to 1257L.

Although I was pleased with the outcome, the conversation with HMRC left me confused...why would they make my tax code less favourable due to my low pension income?

Are HMRC now looking at your income and assuming that you must have savings and taxing you accordingly?

If your PAYE income is less than £12,570, they notionally allocate some of that 'spare' unused allowance to income from other sources, but if this is non-PAYE income (such as savings) then it doesn't actually result in any tax being paid.  They use the previous year's savings interest income figure as an estimate for the current one, unless you advise them otherwise.

OK, thanks. That kinda makes sense! 
The tax code does have an impact on my UFPLS withdrawals, although it's not massive, but every penny counts! 

eskbanker

Steve_s1 said:

eskbanker said:

Steve_s1 said:

I'm early retired, and living on SIPP and ISA, no state pension yet.

My tax code changed last month "due to £100 unpaid interest on savings". My tax code went from 1257L to 1247L. However the total interest from taxable savings is well within my £1000 allowance as a basic rate tax payer.

I called HMRC and was told that it was probably due to the low forecast income from my SIPP (?), and they promptly changed it back to 1257L.

Although I was pleased with the outcome, the conversation with HMRC left me confused...why would they make my tax code less favourable due to my low pension income?

Are HMRC now looking at your income and assuming that you must have savings and taxing you accordingly?

If your PAYE income is less than £12,570, they notionally allocate some of that 'spare' unused allowance to income from other sources, but if this is non-PAYE income (such as savings) then it doesn't actually result in any tax being paid.  They use the previous year's savings interest income figure as an estimate for the current one, unless you advise them otherwise.

OK, thanks. That kinda makes sense! 
The tax code does have an impact on my UFPLS withdrawals, although it's not massive, but every penny counts! 

You have the option of configuring your forecast income from each source within your online personal tax account (or by phone if you have the patience), so if you're expecting to receive more than they've anticipated then you can adjust the projected figures and the tax code(s) should be amended accordingly.

Dazed_and_C0nfused

Steve_s1 said:

eskbanker said:

Steve_s1 said:

I'm early retired, and living on SIPP and ISA, no state pension yet.

My tax code changed last month "due to £100 unpaid interest on savings". My tax code went from 1257L to 1247L. However the total interest from taxable savings is well within my £1000 allowance as a basic rate tax payer.

I called HMRC and was told that it was probably due to the low forecast income from my SIPP (?), and they promptly changed it back to 1257L.

Although I was pleased with the outcome, the conversation with HMRC left me confused...why would they make my tax code less favourable due to my low pension income?

Are HMRC now looking at your income and assuming that you must have savings and taxing you accordingly?

If your PAYE income is less than £12,570, they notionally allocate some of that 'spare' unused allowance to income from other sources, but if this is non-PAYE income (such as savings) then it doesn't actually result in any tax being paid.  They use the previous year's savings interest income figure as an estimate for the current one, unless you advise them otherwise.

OK, thanks. That kinda makes sense! 
The tax code does have an impact on my UFPLS withdrawals, although it's not massive, but every penny counts! 

Only temporarily, you would get any overpaid tax back automatically.

However the easiest way to avoid that even happening is to ensure you update the estimate of your SIPP income on your Personal Tax Account.  No one can estimate this as accurately as you can.