Can I pay tax on interest direct to HMRC?

echonoire

I inherited some money after my Mum passed away this year and after maxing out ISA and premium bonds etc I have still earned around £5000 in interest (I'm very fortunate).

I work 32 hrs a week so the tax will be taken through my tax code and from my wages. I would much rather just pay the tax owed direct to HMRC and get it out of the way rather than keep having my tax code change. Is this possible? Or is the only way to do a self assessment?

Thanks.

born_again

Why pay, when you are making more interest while you pay it back.

When daughter got this there was the info on the form on how you can do it.

DRS1

You say you have maxed out ISA and Premium bonds. Do you have room to contribute more to your pension?

You would need £10k of taxable savings interest before HMRC might ask you to do a self assessment. You may be able to volunteer to do one but why put yourself through that if you don't have to? It won't necessarily stop them fiddling with your tax code.

Bigwheels1111

I have to self assess, Makes it simple.

That does not mean that HMRC wont srew it up.

Messed up last years tax code, carried the mistakes over to this year as well.

3 calls last year to sort, only one call this year to sort.

Paying over time may be better for your situation, For me, I think they will want £2600 + 50% upfront for next year, So best part of 4k.

jak22

For this year 26/27 you can update expected income and interest in your personal tax account, e.g. in the app, so that the tax code for this year can be adjusted to take account of the interest - this seems the easiest and natural way. Once the tax year ends, if more than 10K taxable interest has been earned there is the opportunity to do SA - which can be a simple task if you've kept records. This gives the option to pay any tax owed immediately, e.g. via the app, the alternative would be a change of tax code. That interest figure is then likely used as the assumed figure for the following year affecting its tax code.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6668589/can-i-pay-tax-on-interest-direct-to-hmrc

What you want to do is fine. But you need to realise two things are likely to happen and you need to consider how to approach both.

Later this summer/autumn HMRC will check the 2025/26 tax year and send you a calculation if they think you have extra tax to pay. A P800 is sent if they plan on collecting the tax through a change to your tax code. A PA302 (Simple Assessment) is sent where that (in HMRC's eyes) isn't an option.

With a Simple Assessment you have to pay HMRC direct. With a P800 you don't have to but if you prefer to pay it direct you can do. Paying by early January is best as it is sorted before HMRC calculate your tax code for the start of the next tax year.

HMRC will also update your current tax code on the basis you will receive the same interest again for 2026/27. If the interest for 2026/27 will be a lot less then you can provide an update (for each individual account) but if you don't and you are due a refund you will eventually get that without needing to do anything.

I think a lot of people just let this take its natural course but some prefer to contact HMRC and get their tax code updated so it is more accurate and there is less need for a refund later.

zagfles

Sorry OT but have you looked at gilts, especially low coupon ones where most of the return is tax free capital gain. For instance TN28 gives yield to maturity (Jan 2028) of 4.32% nearly all of which is tax free, you only pay tax on the small 0.125% coupon.

Heard someone describe tax on interest as "tax on ignorance", it's not far from the truth, especially with tax rates on interest rising next year.

InvesterJones

https://forums.moneysavingexpert.com/discussion/6668589/can-i-pay-tax-on-interest-direct-to-hmrc

Won't you still have to pay tax on the interest in future years? If so, a tax code change is probably the easiest way of dealing with it - it will also adjust if you gradually pay less in future years as the balance transfers to tax wrappers.

I don't agree at all about the 'tax on ignorance' comment - instead what's often the case is that people are so fearful of paying tax (which ultimately goes to pay for services we all use) that they instead accept a lower total return, which definitely makes no sense (you're harming yourself twice over!).

zagfles

https://forums.moneysavingexpert.com/discussion/comment/82001728#Comment_82001728

I think the comment was aimed at people who have shedloads for years on end in high street bank accounts paying around or even less than 4% interest. Some even paying higher rate tax on their interest!

Other than regular savers, which are invariably limited to small amounts, I think you'd struggle to beat or even get close to 4.3% net if you pay tax on interest. Would need a rate of about 5.4% for a basic rate taxpayer.