Estimated Savings Interest for Current Tax Year

ivormonee

mebu60 said:

You can ask them to change the estimates but be very careful. If you make them lower than the actuals turn out to be there will be an interest penalty applied retrospectively. 

Is this really true? The tax due on savings is not due until 31 Jan in the year following the tax year end (or am I wrong in thinking this), so even if the interest was underestimated, with a corresponding lower payment of tax during the tax year, the reconciliation would be done after the tax year once actual interest figures are determined, and any further tax due would be paid within the period prior to 31 Jan. I'd be interested to learn if my understanding of this is incorrect.

MsSED

Dazed_and_C0nfused said:

MsSED said:

eskbanker said:

MsSED said:

Albermarle said:

It is not unfair, because HMRC have no choice but to base their calculations on last years interest, without any other info to go on. 
You can change your estimated interest that you will receive this year on your online personal tax account, which should help the situation.

I have to disagree and will not change my views, which is that HMRC should have told me that this would happen when I stopped the self-assessments? I am not tax savvy, and when they billed me in arrears for the first year after SA stopped, there was no indication that I would have to pay the next year's interest over a three month period.  In my opinion it is grossly unfair.  By the way, I am retired, so only have my pension and savings, which I may have to dip into to pay bills over the next few months.          

Regardless of your feelings about communications, HMRC is entitled to collect tax during the same year in which the income is earned rather than waiting until after it's finished.  As above, if you wish to correct the figure they're using with a better estimate than carrying forward last year's, you can.

While I realise that HMRC are entitled to collect tax during the same year, I did now know that they would do it under the circumstances I have already explained, i.e. because they had not done so the previous year.  I may be naive but having spoken to several others about this matter, none of them had ever heard of this.  Sadly, we are not all experts.

It is a relatively new thing in the lifetime of PAYE.

Maybe 10 years or more ago the extra tax due for the first ~9 months of 2025/26 would have been collected via your 2026/27 tax code.  Along with the 2026/27 tax due on the (estimated) interest.  And anything owed for 2024/25.

Nowadays HMRC try to collect as much tax as possible during the current year (2025/26).

Thank you for explaining this.  I am gradually piecing together how things work with HMRC.

Dazed_and_C0nfused

ivormonee said:

mebu60 said:

You can ask them to change the estimates but be very careful. If you make them lower than the actuals turn out to be there will be an interest penalty applied retrospectively. 

Is this really true? The tax due on savings is not due until 31 Jan in the year following the tax year end (or am I wrong in thinking this), so even if the interest was underestimated, with a corresponding lower payment of tax during the tax year, the reconciliation would be done after the tax year once actual interest figures are determined, and any further tax due would be paid within the period prior to 31 Jan. I'd be interested to learn if my understanding of this is incorrect.

If you don't have to file a tax return then penalties really aren't an issue.

It might be daft to say you will get a tiny amount or no interest if you know you will get a lot.

But if you provide an estimate with the best of intentions and it turns out you actually received more interest then providing you pay the tax due, either direct to HMRC or by an adjustment to your tax code, then you aren't going to face a penalty.

According to LITRG you don't even get a penalty if you pay a Simple Assessment bill late.

https://www.litrg.org.uk/tax-nic/how-tax-collected/simple-assessment#5

AP3

The exact same thing happened to me. Take a look at my thread here: https://forums.moneysavingexpert.com/discussion/6645592/do-hmrc-see-alternative-income-live-now/p1?new=1

slinger2

AP3 said:

The exact same thing happened to me. Take a look at my thread here: https://forums.moneysavingexpert.com/discussion/6645592/do-hmrc-see-alternative-income-live-now/p1?new=1

I've just been given a K700X tax code. They don't take any tax out of my state pension or my savings interest. So they got to take all my income tax out of my £10k private pension. I suppose it's all swing and roundabouts but the whole thing seems pretty daft to me.

eskbanker

slinger2 said:

AP3 said:

The exact same thing happened to me. Take a look at my thread here: https://forums.moneysavingexpert.com/discussion/6645592/do-hmrc-see-alternative-income-live-now/p1?new=1

I've just been given a K700X tax code. They don't take any tax out of my state pension or my savings interest. So they got to take all my income tax out of my £10k private pension. I suppose it's all swing and roundabouts but the whole thing seems pretty daft to me.

What alternative method of collecting tax during the year, rather than many months after its end, would you suggest?

Dazed_and_C0nfused

eskbanker said:

slinger2 said:

AP3 said:

The exact same thing happened to me. Take a look at my thread here: https://forums.moneysavingexpert.com/discussion/6645592/do-hmrc-see-alternative-income-live-now/p1?new=1

I've just been given a K700X tax code. They don't take any tax out of my state pension or my savings interest. So they got to take all my income tax out of my £10k private pension. I suppose it's all swing and roundabouts but the whole thing seems pretty daft to me.

What alternative method of collecting tax during the year, rather than many months after its end, would you suggest?

Sometimes I do wonder if George Osborne's major changes to taxation of interest were really that great an idea.

Most people had basic rate tax deducted and also had no need to interact with HMRC.

HMRC had less phone calls, letters etc about interest to handle.

The treasure must surely have been getting significantly more money.  Which it could clearly benefit from.

Change isn't always good!

slinger2

eskbanker said:

slinger2 said:

AP3 said:

The exact same thing happened to me. Take a look at my thread here: https://forums.moneysavingexpert.com/discussion/6645592/do-hmrc-see-alternative-income-live-now/p1?new=1

I've just been given a K700X tax code. They don't take any tax out of my state pension or my savings interest. So they got to take all my income tax out of my £10k private pension. I suppose it's all swing and roundabouts but the whole thing seems pretty daft to me.

What alternative method of collecting tax during the year, rather than many months after its end, would you suggest?

I have a £10k state pension and a £10k private pension. Why not take half the tax from one and half from the other?

eskbanker

Dazed_and_C0nfused said:

eskbanker said:

slinger2 said:

AP3 said:

The exact same thing happened to me. Take a look at my thread here: https://forums.moneysavingexpert.com/discussion/6645592/do-hmrc-see-alternative-income-live-now/p1?new=1

I've just been given a K700X tax code. They don't take any tax out of my state pension or my savings interest. So they got to take all my income tax out of my £10k private pension. I suppose it's all swing and roundabouts but the whole thing seems pretty daft to me.

What alternative method of collecting tax during the year, rather than many months after its end, would you suggest?

Sometimes I do wonder if George Osborne's major changes to taxation of interest were really that great an idea.

Most people had basic rate tax deducted and also had no need to interact with HMRC.

HMRC had less phone calls, letters etc about interest to handle.

The treasure must surely have been getting significantly more money.  Which it could clearly benefit from.

Change isn't always good!

Point taken about the pre-2016 regime for taxing savings interest at source, but even back then there'd presumably have been the need to adjust tax coding to collect anticipated liabilities via PAYE for those with enough state and private pension income to exceed their personal allowance?

eskbanker

slinger2 said:

eskbanker said:

slinger2 said:

AP3 said:

The exact same thing happened to me. Take a look at my thread here: https://forums.moneysavingexpert.com/discussion/6645592/do-hmrc-see-alternative-income-live-now/p1?new=1

I've just been given a K700X tax code. They don't take any tax out of my state pension or my savings interest. So they got to take all my income tax out of my £10k private pension. I suppose it's all swing and roundabouts but the whole thing seems pretty daft to me.

What alternative method of collecting tax during the year, rather than many months after its end, would you suggest?

I have a £10k state pension and a £10k private pension. Why not take half the tax from one and half from the other?

Conceptually that would make sense, but practically it would require DWP to start using PAYE, a far from trivial task!