HMR deducted 2025-2026 over £700 for interest savings I never earnt!

noideapleasehelp

Hi Eskbanker

You're right.

It is all visible online via governent gateway. And if I click correct - it goes in a tail spin because when I ask to update records - I get to prove etc.

And this is exactly what is happening.

So thank you for that explanation because that's what I needed confirmation of and that's what happening.

It's just annoying and frustrating that HMRC can take money from you one tax year, and roll that over to another tax year when actually I shouldn't have been deducted that money in the first place!

I now need to write to them and ask for them to review their records which has taken time and doing research etc to understand if I'm replying correctly.

It's fine for me because I'm still of the age where I get that this systems are confusing, and I check my records online.

In 5 years time will I be still able to undertsand all of this? I have no famlily, friends to help me negotiate this.

When I did it for Mum (dementia 2017), there's no way that Mum would have understood why HMRC wrongly took away 50% of her private pension because they believed she was not paying the right interest. And HMRC were wrong because their calculations didn't take account of her personal allowance + tax free interest allowance. They got her bank records - and just assumed she failed to pay tax, and took the money away at source.

Surely that's not right?

My Mum would never have got her head around all of this. How would anyone age 80 plus understand all this? How will I ever understand all of this when I get to Mum's age?

There must be so many people out there like my Mum without help from family and friends on finances who have been caught out by this?

I've now written to HMRC and asked how this is calculated and using me as an example.

The process they have can be improved — and something their end needs to happen to stop making it a "thing" that those of us who discover this issue have to write in and give evidence and prove it.

Maybe I'm wrong but in this day and age of computer sytems, surely, HMRC have the ability to have systems that do the calculations correctly and work out if you've gone above the interest threshold for your tax bracket and take appropriate tax out rather than what they are currently doing which is "you've earnt interest" because the banks have told us so — so we'll just deduct it from your pension/paye earnings — and it's up to you to aruge to get the money back.

I believe there's something not right here and this is why I did this thread to understand if this is a "thing" and can we champion change? Surely it's a computer algorithm their end or a system process design?

Expecting an 87 year old with dementia to recognise that 50% of her pension money has been taken away when she doesn't do internet banking, and doesn't even now have a local bank to visit, and now that most banks default to bank statements by pdf online rather than physical paper (even if you ask for paper statements), it's hard to understand how my mum would ever have realised that HMRC wrongly took away money from her pension for over 1 year, she didn't actually owe them.

And that's why I've done this thread. Yes, I'm impacted, but I'm accutely aware that there are a load of people out there that don't know this stuff and HMRC are taking money away wrongly and because it seems, we now have to know they done this and argue to get the money back, it's wrong that the system has changed so that peope have to write in to get their records addressed.

Again, it just feels like a situation I experienced recently with state pension stuff, and I discovered I wouldn't qualify for a state pension. Apparently, they'd got years of paper records for me, and at some point it was decided it wasn't cost effective to upload that data to the new system and so it was reliant on me to prove I'd paid NI to contribute to the state pension. I was lucky, I had payslips from 1976 (amazing that they were still visible in print ink so many decades afterwards) onwards that hadn't been uploaded to the govt site, and because I could give print everidence, I've got my pension. Should it have been left to me to undestand what the govt had decided at that time not to upload data — and just leave it to the person concerned to try and prove things?

How many of those people are impacted by this and just don't have the records I do from 1970s? Many I susepct. And again, this feels like that. Why are we left to prove things when actually the govt should have IT systems in place and we should not have to investigate, understand the nuances and then write to HMRC to get our records corrected?

Who made the decision to say that HMRC will work in this way? And that it means that people themselves have to be responsible for holding HMRC to account and prove what they are disputing to get their records adjusted?

A friend recently suggested that it's not in the govt's interest to resolve this as it means that they have money in their accounts - that possibly will never be recovered - and so are "quids in".

Thank you to everyone who replied. Sorry to raise a further issue.

All the best.

eskbanker

When I did it for Mum (dementia 2017), there's no way that Mum would have understood why HMRC wrongly took away 50% of her private pension because they believed she was not paying the right interest. And HMRC were wrong because their calculations didn't take account of her personal allowance + tax free interest allowance. They got her bank records - and just assumed she failed to pay tax, and took the money away at source.

Surely that's not right?

No, it can't be right - the annual assessment will explain how each year's finalised position is calculated and will factor in any allowances due.

Maybe I'm wrong but in this day and age of computer sytems, surely, HMRC have the ability to have systems that do the calculations correctly and work out if you've gone above the interest threshold for your tax bracket and take appropriate tax out rather than what they are currently doing which is "you've earnt interest" because the banks have told us so — so we'll just deduct it from your pension/paye earnings — and it's up to you to aruge to get the money back.

Yes, some of that is indeed wrong - while it is true that previous year(s) interest figures are used as the basis for tax coding calibration, this only drives the provisional deductions via PAYE and after the year is complete the finalised assessment does use the actual interest earned. If tax was overpaid then it's refunded, no arguing necessary.

As above, the coding notices will make it clear where assumptions are being made about current year interest and if the taxpayer has more accurate figures then adjustment can be handled via the online portal.

It is all visible online via governent gateway. And if I click correct - it goes in a tail spin because when I ask to update records - I get to prove etc.

Not sure quite what you mean by this?

It's perhaps worth recognising that HMRC has a duty, ultimately on behalf of all taxpayers, to collect all tax expected to be due in real time rather than waiting to do so in arrears, i.e. after the year end, when all actual interest earnings are known, and therefore estimates have to be used. However, these estimates are only used when applying PAYE deductions (and are declared in the issued coding notices), and when the actual figures are known after year-end, they're the ones used to calculate the actual tax liability, after which overpayments will be refunded, or underpayments collected.

If I understand your (lengthy!) posts correctly, you feel that some of the interest figures reported by banks are incorrect, which is really a separate issue from the above but will doubtless have contributed to the confusion…