Tax on Savings

Spivo46

As a non tax payer does anyone know why HMRC are taking "untaxed interest on savings and investments" into account on my tax codes? £578 last year and £758 next year? This reduces my standard 1275 allowance each year.

I thought that i would pay no tax on interest under £1000 and the bulk is in ISA's anyway!

Woodstok2000

What do you mean by non-tax payer?

Are you a basic, higher or additional rate tax payer? What was your income last year and how much interest have you earned each year over the past 3-4 years from any of the following:

• bank and building society accounts
• savings and credit union accounts
• unit trusts, investment trusts and open-ended investment companies
• peer-to-peer lending
• trust funds
• payment protection insurance (PPI)
• government or company bonds
• life annuity payments
• some life insurance contracts

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6655881/tax-on-savings

It's normally because you have unused tax code allowances and the interest uses those first, before the 0% tax bands come into play.

Spivo46

https://forums.moneysavingexpert.com/discussion/comment/81889445#Comment_81889445

Thank you - that makes sense (i think)

So if you have a personal allowance of 1275L and earn £11000, it will assume you will earn £1275 in savings interest and allocate an allowance/code to that? Seems a little odd considering as a none tax payer you could potentially earn £5000 interest free?

Spivo46

https://forums.moneysavingexpert.com/discussion/comment/81889433#Comment_81889433

I am a non tax payer, part time under and my personal allowance

Annemos

I had a pleasant surprise this week with the Inland Revenue Systems. They have brought some changes in, which have made it much easier for me to deal with the Tax Code.

I am signed up through the Gateway and this week I received a Mail from them saying "Check your 2026-2027 tax code".

(I got into a mess last year and ended up in a Complaint, because I wanted to SUBTRACT out my ISA interest income from the Tax Code. I had moved income into ISA's. The descriptions given for "make a change" were very inadequate last year, to take something OUT of one's code…. and I had caused a real mess by trying to make that change and doing it wrongly!)

However, this time I have noticed that the options offered have changed, and it is now MUCH easier to complete it properly when you go into your PAYE code on their website, review it and want to make changes. They give 3 clear options:

Do you have other income that is incorrect?

Do you have other income that is missing?

Do you have other income that has ended?

It is that last option that seems to make it much easier to remove an amount of Pounds from the Tax Code, if one sees that they have overestimated. If I had had that third option last year, all would have been fine, I am sure.

======================

I am not an expert, so I am unable to comment on the issue of whether a taxpayer should only need to pay tax on "estimated non-wage/pension type income" after the tax year has ended. For example, because of a timing issue with Interest income only being paid at the end of Bonds. One would end up paying tax as one goes along, when one has not yet had the income.

Personally, if it is not too much, I prefer to do my estimate of income and pay it as I go along through the Tax Code.

littlemissbossy

Could I just jump in to ask a question.

If you amend your savings interest figure on the HMRC website do you put the total amount in or deduct the £1000/£500 allowance first?

Spivo46

https://forums.moneysavingexpert.com/discussion/comment/81889657#Comment_81889657

I tried to change this but i am unable to edit this. It also relates to last year as well. I spoke to HMRC this morning and they told me it was correct. After many questions from myself and 30 minutes i was losing the will to live 🤣

My mistake is not keeping records of interest paid and jumping around various accounts has done me no favours! Having said that, no way have i earned more that £1000 in interest outside of my ISA.

Annemos

https://forums.moneysavingexpert.com/discussion/comment/81889657#Comment_81889657

I have deducted the 1000 first for mine! And reported the remainder.

They are going to claw the tax back on the amount shown throught the code, so I do not want them taxing the 1000 they should not be.

But I am not an expert… just doing what I think!

Annemos

https://forums.moneysavingexpert.com/discussion/comment/81889673#Comment_81889673

If this is the case and you are definitely going to be under 1000, I would be inclined to go into the system and take the whole amount out, that they are showing for untaxed interest.

Make sure you are calling it other Income (not earned). And in the Option 1 incorrect income? Does that work? Or try the Option 3 Income (not earned) and put the amount in there as income that has stopped for 2026-2027.

(Re that Complaint I had to submit… things went wrong when I telephoned and the agents were doing one change in the System for me and then the System itself went and did its own changes afterwards! If one can manage it, it's best not to call the HMRC. As I say, the options to do a change are clearer this year within the system itself.)

Spivo46

Deduction	Current tax year ends 5 April 2026	Next tax year from 6 April 2026
Untaxed interest on savings and investments	£573	£758
Total deductions	£573	£758