Tax on interest

fly-catchers

I am still getting my head round the change to my personal allowance code and the tax I am paying on my savings interest. I have added together all the interest that I earned in the tax year 24/25. I certainly go over the £1000 but it still is less than the £700 odd amount over that HMRC say. Most of my regular savers add their interest on at the end. But my Virgin saver added it each month. So do HMRC include that even although that saver finished in the next tax year? Also does the £5 reward from Halifax and the 123lite Santander payments count? And is anything being included from this year as well? Also are they including any amounts from survey site payments. Or does that have its own tax threshold?

wmb194

fly-catchers said:

I am still getting my head round the change to my personal allowance code and the tax I am paying on my savings interest. 

I have added together all the interest that I earned in the tax year 24/25. I certainly go over the £1000 but it still is less than the £700 odd amount over that HMRC say. Most of my regular savers add their interest on at the end. 

1. But my Virgin saver added it each month. So do HMRC include that even although that saver finished in the next tax year?

 2. Also does the £5 reward from Halifax and the 123lite Santander payments count? And is anything being included from this year as well? 

3. Also are they including any amounts from survey site payments. Or does that have its own tax threshold?

1. Yes, the interest arises when it's credited to your account* so one year accounts paying, say, monthly or quarterly interest can have reportable interest in two tax years.

2. Usually treated as cashback - not classed as income so you and the banks don't need to declare it - but there is an exception with Halifax if you chose the 'keep £5k in your account option,' IIRC that's 'other income.' IIRC it was grossed up to £6.25 with 20% withheld at source. The £500 'spend' on a debit card option is cashback.

3. No. Survey site payments should be declared as 'other income' and I don't think HMRC has sight of these anyway. If less than £1000 my understanding is that these can be covered by the £1000 p.a. trading allowance and so don't need to be declared.

HMRC is known to use prior year interest received to estimate future interest. Could it be that it's assumed old accounts are still paying the same interest this year? You'd need to contact HMRC to find out.

*There's an exception for inaccessible interest when it all arises in the tax year of maturity but this isn't the case with this instant access Virgin RS.

fly-catchers

Where I also get confused is that on one communication it saids I currently owe £106.40 which will be paid back from now till the new tax year with a change in my tax code from December. Where they assume I am on an income of £1700 higher than I am and calculate the tax from that. But the app it said I owe HMRC £163.80. Which will be paid back from the new tax year with an adjustment to my personal allowance code. Which one is correct? Guess phoning them is the only solution!

Dazed_and_C0nfused

fly-catchers said:

Where I also get confused is that on one communication it saids I currently owe £106.40 which will be paid back from now till the new tax year with a change in my tax code from December. Where they assume I am on an income of £1700 higher than I am and calculate the tax from that. But the app it said I owe HMRC £163.80. Which will be paid back from the new tax year with an adjustment to my personal allowance code. Which one is correct? Guess phoning them is the only solution!

Both are likely to be correct.

2024/25 (last tax year) tax owed £163.80, to be included in 2026/27 tax code (next tax year)

2025/26 (this tax year) estimated tax owed £106.40, to be collected in 2025/26 tax code (this tax year).

wiseonesomeofthetime

fly-catchers said:

Where I also get confused is that on one communication it saids I currently owe £106.40 which will be paid back from now till the new tax year with a change in my tax code from December. Where they assume I am on an income of £1700 higher than I am and calculate the tax from that. But the app it said I owe HMRC £163.80. Which will be paid back from the new tax year with an adjustment to my personal allowance code. Which one is correct? Guess phoning them is the only solution!

I had the same issue, so rang them.

I was informed that the lower figure (e.g. your £106.40) represents tax owed on savings interest over the PSA for the 8 months to December, and that there will be further tax due in Months JFMA, so to expect further deductions from my salary to cover that too. That is based on their estimated tax due for tax year 2025/26 (which in turn is based on their exact figures from the banks and building societies of savings interest received in 2024/25).

The sum owed for the 2024/25 tax year period, will be deducted at the rate of 1/12 of the total each payday. In your case, that would be 1/12th of £163.80 pm.

Was advised correctly? Who knows. I was also told by this agent that the way my tax affairs had been handled the two previous occasions, namely pay the outstanding amount due without sending in a cheque or CHAPS transfer was impossible. Yet when I follow the links through on their website, alternative methods appear to be an option!

fly-catchers

When I added all the interest for the 24/25 period including the part interest for my virgin account which was paid every three months I got the figure of £1691. Which I worked out at about £138 in tax due.So somewhat between the two figures they gave me. I assume it will all work out correctly as time goes on?!

wiseonesomeofthetime

I have no idea if it will balance in time, but might be reassured when I get the BBSI breakdown I requested so that I can see where the discrepancies are.

Not happy paying tax on money not received yet, but it is what it is. Never going to win v HMRC who believe they know everything and all is accurate all the time 🤷

Albermarle

wiseonesomeofthetime said:

I have no idea if it will balance in time, but might be reassured when I get the BBSI breakdown I requested so that I can see where the discrepancies are.

Not happy paying tax on money not received yet, but it is what it is. Never going to win v HMRC who believe they know everything and all is accurate all the time 🤷

On the other side, if HMRC did not tax estimated income and waited until all figures were in, and then slapped a big bill on people, sometimes unexpectedly, there would be a lot of complaining.

Kim_13

wiseonesomeofthetime said:

I have no idea if it will balance in time, but might be reassured when I get the BBSI breakdown I requested so that I can see where the discrepancies are.

Not happy paying tax on money not received yet, but it is what it is. Never going to win v HMRC who believe they know everything and all is accurate all the time 🤷

It would be somewhat more palatable and simpler to understand if they would collect over the remainder of this year the tax for 24/25. By the sounds of it, they want tax on an amount that is almost certain to be wrong to a greater or lesser extent (for the current tax year) before the tax that they’re definitely owed.

SevenOfNine

I just got slapped with a tax bill of over £600 for HMRC underestimating savings interest. Thought it was a scam at first.......it wasn't!

InvesterJones

SevenOfNine said:

I just got slapped with a tax bill of over £600 for HMRC underestimating savings interest. Thought it was a scam at first.......it wasn't!

Mine wildly fluctuates - despite giving estimates each year for an amount that's relatively stable, they tend to ignore them, take too much, then issue a huge refund, wildly underestimate next time, ask for a payment/make a large tax code adjustment.. then take too much.. issue a refund..  Now I have a request to supply BBSI for the 25/26 year.. which makes sense but I obviously can't fill it in yet!