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Paying tax on savings interest.
For the first time in the 2024/25 tax year I went over the £1000 interest tax allowance. And by a less amount in 2025/26. Though I went over a certain amount I am sure it’s less than the £760 for 2024/25. they show I owe. They then adjusted my tax code so the last 4 months of the 2024/25 tax year I have paid £39 more tax each month. And from 2026/27 they are adjusting my tax code again to take more tax. So do they assume that each year you are likely to receive a similar amount of interest on your savings? And do they eventually adjust the figures and it all gets sorted out. Or do you need to be proactive yourself to get it adjusted? As for the moment I am not sure what I should do. Or even how via their HMRC app?
Comments
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Yes, they initially assume interest will continue, but they then make an adjustment to correct it when the actual figures are known. So the easiest thing to do is nothing and it will all work out in the end.
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If you don't wish to wait for it to sort itself out, you can intervene and adjust the value of any of your projected taxable income streams via your online personal tax account, after which they'll calibrate tax codings to try to deduct the right amount via PAYE for the rest of the tax year.
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…Though there is a chance they will require a breakdown from you of the interest you actually expect to receive per account, as has recently happened to another poster.
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Yes, it's obviously tricky to provide accurate figures for that at this time of the year! However, I've updated expected interest like that on more than one occasion without any such challenge, so am unsure what the criteria are…
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It was the first I'd heard of it. Could be because of a significant difference, or perhaps random. Maybe something that has been brought in more recently.
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As said poster.. indeed! In my case I was reporting a higher amount of expected interest than they were estimating, so it was a bit of a surprise that they requested proof (and that in the meantime they ignored my estimate and continued to keep me on a more favourable tax code rather than my more accurate estimate). However there is also no due date given for the requested information…
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I suspect HMRC have no real interest in receiving that additional information.
As far as I'm aware they only ask for it when someone wants their tax code updating so it is the person's interest to supply the information, not, in the grand scheme of things, HMRC's as they will get the actual interest details anyway in due course.
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Other posters had reported this previously, within this thread:
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Which leads me to ask, why do you want to pay this tax any earlier than you need to?
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Fair point - in my case it's because I was fed up their wildly varying figures - one year they would vastly over estimate, take too much and then I'd get a lump sum refund, the next they would vastly under estimate, put me on an K tax code or request a lump sum payment, then over-estimate the next etc. All the while my actual interest was pretty stable year to year, but I don't think their systems could cope with the fact it was earned by different institutions from year to year.
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