Should The Government Revert to Tax Deducted at Source?

Shylock_249

I'm only thinking about being placed on Self Assessment because of bank interest above 10k.

On face value one would take it that whatever information was provided by the taxpayer would be accepted by HMRC, but I think that is highly unlikely indeed. I can't imagine that if I only reported 11k of 16k interest HMRC would just accept my figure?

I'd much prefer that interest was deducted at source and they did away with the PSA, which if I'm NOT mistaken only means £200 to my wife as a lower rate tax payer and £100 to myself. I'd have certainly paid someone £300 to make the two submissions of Self Assessment disappear.

If 20% of the reported bank interest cannot be accurately matched it's NO wonder we taxpayers are unable to view the entries on the Gov.UK web site.

Shylock_249 - Minister of Good Ideas!

Isthisforreal99

https://forums.moneysavingexpert.com/discussion/6663969/should-the-government-revert-to-tax-deducted-at-source

If ypu declared £11k when HMRC had £16k reported then a compliance check might be opened and you would be charged interest and penalties on the tax owed.

It's swings and roundabouts for HMRC, when interest was taxed at 20% there were many thousands of non-taxpayers who had to claim the tax back. So paying it gross negates this but any staff/resource saving is probably now utilised on policing the new system. I imagine the % of people with savings income over £1000 is less than we would think.

flaneurs_lobster

If 20% of the reported bank interest cannot be accurately matched it's NO wonder we taxpayers are unable to view the entries on the Gov.UK web site.

I've spent a working life in IT, most of it in Financial Services of some sort (even quite a bit in regulatory reporting) so I KNOW it's not this simple, but….

You've one NI number, it's held against everyone's savings accounts. Even given the number of births, deaths and just plain can't finds in a year, how can 20% be unmatched?

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/81961352#Comment_81961352

Surely NI numbers aren't held against everyone's savings accounts? They're undoubtedly held against some but it wasn't mandatory for a long time, even if it is now, and hence:

Column T: National Insurance number

Leave this field blank if not known or not applicable.

https://www.gov.uk/guidance/how-to-complete-a-bank-and-building-society-interest-return

cc123mm456

If you declared £11k when HMRC had £16k reported then a compliance check might be opened and you would be charged interest and penalties on the tax owed.

You would only be charged interest and penalties if the compliance check successfully established that the tax payer had under declared the interest.

Just the fact that an enquiry is opened doesn't mean that HMRC are correct. It's clear from other discussions that they don't have the information on when the interest should arise for tax on multi year fixed term accounts.

The tax payer might have to prove the access conditions for the account, but they have the right to have the interest taxed in line with legislation.

SiliconChip

https://forums.moneysavingexpert.com/discussion/comment/81961352#Comment_81961352

Unfortunately the NINO is not currently held against any savings accounts except for ISAs. I went through this with Chase a couple of years ago when my savings interest with them was not included in the total calculated by HMRC, and both Chase and HMRC confirmed that NINO is not included with the interest reported by banks (although interestingly there is a field for it on the spreadsheet that Chase sent me showing what they had reported that sadly was blank).

cc123mm456

https://forums.moneysavingexpert.com/discussion/6663969/should-the-government-revert-to-tax-deducted-at-source

I'd be interested in where that quote is from, but it doesn't surprise me.

I think that HMRC will probably make up some of the shortfall by including ghost accounts on tax payers records. Those that they estimate will be paying the same interest as last year, even though the accounts have been closed.

Last time I helped with sorting out the data issue for a family member that is not in self-assessment, about half the accounts that HMRC had on record had been closed years before. Sometimes the (non-existent) interest was reported under obviously dummy account numbers. NS&I accounts seemed to be the worst for this.

Maybe that situation has improved a bit since then, but somehow I doubt it.

Isthisforreal99

https://forums.moneysavingexpert.com/discussion/comment/81961425#Comment_81961425

What are you talking about? OP specifically asked what would happen if they declared £11k when it should be £16k - nobody mentioned multi year accounts.

badmemory

I noticed a few months ago that one of my banks did ask for my NINo for my non-ISA accounts. Last year HMRC also (for the first time in years) had my savings interest correct to the penny. Frankly just not worth the risk of trying to get it wrong.

cc123mm456

OK, I misunderstood the scenario. The OP Said

I can't imagine that if I only reported 11k of 16k interest HMRC would just accept my figure?

I misread that comment to mean that the scenario was that the OP legitimately believed the correct number was 11k, but HMRC had 16k on records

The point I was making is that there can be a legitimate reason for the difference between the figure reported by the tax payer and the data that HMRC have on record.

But yes, if the tax payer incorrectly under reported the number (maybe due to an error with their records), it is agreed that that penalties and interest can apply.

flaneurs_lobster

https://forums.moneysavingexpert.com/discussion/comment/81961434#Comment_81961434

Somewhat counterintuitive that the only accounts where NINo is a mandated entry for reporting are ISAs.

(yes I can see why but anyways….)