Change of tax code due to savings interest

janire

The interest I earned on a bond I had was over a 2 yr period, tax yrs 22/23, 24/25. HMRC took that interest to be for tax yr24/25 and have predicted that this amount will be earned again during tax yr25/26. This has triggered a change in my tax code. I have spoken to them today to point this out and to inform them that the interest this year will be less. They have adjusted my code back .

This is worth knowing as the interest information HMRC receive from banks and building societies do not take into account the length of time some investments are fixed in for as interest is only paid at the end of the fixed term. This could be 2-5 or more years. So the interest paid at the end of that term has actually been earned over a period of years. So therefore unfair to hike your tax code.

eskbanker

Yes, both of those issues are regularly mentioned on this board and the savings one.

Tax liability for multi-year savings is notionally when the interest is accessible, rather than when it's paid, but the BBSI submissions from banks and building societies to HMRC only represents the latter. However, where interest is only paid at maturity then that's academic, and the full amount is correctly attributed to the year of payment, rather than being pro-rated across each year if that's what you were hoping for.

The issue of tax codes being adjusted on the provisional assumption that current year interest will be the same as prior year interest is also frequently discussed - to be fair, it's not an unreasonable assumption but as you say, the taxpayer can update HMRC with more accurate data if not wishing to wait for this to unwind itself via rebates after the end of the tax year.

Albermarle

The interest I earned on a bond I had was over a 2 yr period, tax yrs 22/23, 24/25. HMRC took that interest to be for tax yr24/25 and have predicted that this amount will be earned again during tax yr25/26. T

As mentioned above this is a regular topic. However the problem is usually the other way around, in that posters want the interest to be registered in the tax year that the fixed rate bond matures. However the savings providers normally report interest added annually to HMRC. As HMRC have no idea of whether the interest has been generated in an easy access or fixed rate with no early access, they just use the annual figure. This is actually against their own guidelines, which say the interest should be taxed at maturity. So in fact your case is rather unusual.

wmb194

https://forums.moneysavingexpert.com/discussion/comment/81859841#Comment_81859841

It could be NS&I. Anecdotally NS&I is the only(?) one that reports inaccessible interest wholly in the year of maturity to HMRC.