Do "Banks" report savings interest to HMRC for you?

[tlf67482]

Does anyone know if "Banks" report your savings interest amounts to HMRC for you so if you do owe any tax this is automatically sorted for you and you do not need to do anything?

If banks do automatically report does the HMRC take into account the Starting Rate For Savings and the Personal Savings Allowance as appropriate for you?

If the savings account is in joint names does the reporting system automatically split the interest amounts 50-50 and assign half to each individual?

Thanks

[kempiejon]

yes

HMRC requires UK banks and building societies to submit information annually about interest paid or credited to ‘reportable persons’. The section on ‘making a bank and building society return’ explains ‘reportable persons’.

This information is used to pre-populate customer tax accounts. It informs:

the issue of PAYE notices of coding and tax calculations
checks to make sure Self Assessment tax returns are accurate and complete

https://www.gov.uk/guidance/bank-and-bu ... st-returns

f banks do automatically report does the HMRC take into account the Starting Rate For Savings and the Personal Savings Allowance as appropriate for you?

If the savings account is in joint names does the reporting system automatically split the interest amounts 50-50 and assign half to each individual?

Dunno

[Alaric]

Does anyone know if "Banks" report your savings interest amounts to HMRC for you so if you do owe any tax this is automatically sorted for you and you do not need to do anything?s

In the absence of a unique code such as UTR being declared to savings institutions when an account is opened, HMRC's match up of savings interest with individual taxpayers could well be hit or miss.If they send a demand for tax or adjust the PAYE code downwards, it would be as well to validate their figures.

[mc2fool]

Does anyone know if "Banks" report your savings interest amounts to HMRC

Yes, they do.

so if you do owe any tax this is automatically sorted for you and you do not need to do anything?

No. Reporting of any taxable interest above the allowances, starting rates, etc to HMRC is up to you. If what you report doesn't match up with what the banks have reported to them then they will send the heavies round you may find them questioning your tax return....

[GPhelan]

What an interesting question tlf67482! I have enjoyed exploring this issue.

kempiejohn supplied a link to the HMRC documents describing the reporting requirements for Savings institutions. These internally link to VERY COMPLEX and COMPREHENSIVE specifications for the data to be supplied. However as others comment, the lack of a reliable, consistent and universal personal identifier makes data matching problematic, given the vast number of different savings and investment organisations whose data would need to be matched up to show the income paid to an individual like you or me.

Those who engage in family history and who are used to looking at Census records and Birth, Marriage and Death certificates will know how difficult it is to be truly SURE that those supposedly official records are really accurate and reliable. People appear with names, addresses and birthdates with variable spelling and differing dates on different documents.

That does not make the data collection of savings interest and other income useless, just not fit to populate individual’s Tax returns. I see from my records that the “Non Coded Income” field in the PAYE Income Tax summary of my Personal Tax account is populated from my Tax return. Hence, the value today 5 April 2024 is the exact sum of the Savings Interest and Dividends on the tax return I submitted in July 2023, despite many changes to actual income between those dates.

What does happen to the data is that it is used to populate HMRC’s Connect database, now described as an AI tool and used to look for patterns that may indicate fraud, such as second houses bought and income received, but not declared.
See https://en.wikipedia.org/wiki/Connect_(computer_system)

[tlf67482]

No. Reporting of any taxable interest above the allowances, starting rates, etc to HMRC is up to you. If what you report doesn't match up with what the banks have reported to them then they will send the heavies round you may find them questioning your tax return....

No need to send out the heavies - well within the allowances at the moment.

Moving forward though I will take the opportunity to spread the tax burden better between us both by using accounts in single name also rather than joint especially with saving interest rates being so much higher it needs to be managed more pro-actively.

[Gersemi]

Do savings institutions report your interest to HMRC? - Yes
Do they do it "for you" - No

They do it so HMRC can risk assess to see if you have anything to report to them. You are required to report income to them if you have income that hasn't been taxed at source and is liable to tax. If you are asked to complete a Self Assessment of course you declare it on that. If not you must contact them before 5 October following the end of the tax year to advise them of the income.

HMRC may use the information they have to adjust your tax code.

When you complete a Self Assessment online it will automatically allocate Personal Allowances (including the Personal Savings Allowance) and rate bands (including the starting rate for savings) as appropriate. You will be able to see how this has been done before you submit it.

More information at https://www.gov.uk/self-assessment-tax- ... tax-return

[yorkshirelad1]

I would believe so, and been doing it for a while.

My mother (who was in her late 80s at that point) forgot the report some bank interest on her tax return (she was a firm believer in spreading her eggs but well under the FSCS limit, and had accounts with about 19 institutions until I rationalised a few). In about 2010, she got a polite letter from HMRC asking why she had not reported some interest from one of her (many) bank accounts (it was not insubstantial so they weren't going to waive in under the "de minimus" heading). I spent a fun (not) week with her, going though her somewhat incomplete paper-based records, which is not something I would recommend. Her view was somewhat cavalier along the lines of "what are they going to do to me, throw me in prision...." on the basis that the grim reaper would get her sooner than HMRC (we didn't have to test that competition, fortunately, just worked out and paid up what tax was due, much to her annoyance)

[Dicky99]

What with higher interest rates, lower allowances and closure of hmrc help lines, what could possibly go wrong considering all the financially unwordly people who, with cash languishing in savings accounts, have become accustomed to earning next to no interest to have to think about.

[Watis]

I would make it a requirement that the account holder receives a copy of all information sent to HMRC.

That would help people complete their tax returns correctly, if nothing else.

I can't see any downsides with my suggestion - can you?

Watis

[Seasider]

For the last several years I have been getting Simple Assessment letters based on the banks reporting my savings income to HMRC. Yes these letters do include a calculation showing the personal allowance and the personal savings allowance and the starting rate of tax at 0% before telling me what tax I haven't paid on the interest.

What annoyed me was that I had paid tax on it because I do self assessment but it seems the two bits of HMRC don't talk to each other and I had to spend an hour or more on the phone to cancel the Simple Assessment. That has happened several times and is quite tedious.

However last year it came in handy because Nationwide had told HMRC about some interest on a closed account which they "forgot" to mention on their summary of my taxable interest for that year. This meant the Simple Assessment letter showed a higher amount of interest than I would otherwise have declared. I queried it and found out that it was my mistake not HMRC's. Happily that was in time for me to correct the self assessment.

So as mentioned above yes it would be useful if the banks gave us the same information they give HMRC.

Personally I don't know why they stopped deducting the tax at source the way they used to.

[Lootman]

So as mentioned above yes it would be useful if the banks gave us the same information they give HMRC.

I suspect that the taxman would prefer for us not to know exactly what data they have on us. Otherwise taxpayers would know for sure those situations where the taxman has no data, which might encourage some economy with the truth.

The lack of certainty about what the taxman knows keeps people honest.

It is probably safe to assume that the taxman can see, or has easy access to, the information on your consolidated tax certificates. In my view it would be a folly to deviate from those numbers, unless they are blatantly wrong and you can prove it.

Personally I don't know why they stopped deducting the tax at source the way they used to.

I don't know why that was changed but personally I prefer no tax withheld since it means that the taxman never owes me.

[mc2fool]

So as mentioned above yes it would be useful if the banks gave us the same information they give HMRC.

In theory, cockups notwithstanding, they do. It's the interest certificate they give you each year (at least for savings accounts, for some reason they don't seem to do so for interest bearing current accounts).

Personally I don't know why they stopped deducting the tax at source the way they used to.

Because boy George in the 2015 budget introduced:

"a new Personal Savings Allowance that will take 95% of taxpayers out of savings tax altogether.
:
With our new Personal Savings Allowance, 17 million people will see the tax on their savings not just cut, but abolished.

An entire system of tax collection can be scrapped.

At a stroke we create tax free banking for almost the entire population."
https://www.gov.uk/government/speeches/chancellor-george-osbornes-budget-2015-speech

So with the vast majority of savers getting (then) less than £1K of interest it didn't make sense to continue taxing them at source and then have them reclaiming the withheld tax.

[the0ni0nking]

I would make it a requirement that the account holder receives a copy of all information sent to HMRC.

That would help people complete their tax returns correctly, if nothing else.

I can't see any downsides with my suggestion - can you?

Watis

Don't people still get sent annual interest summaries from their bank? I just checked and some I get online whereas others I receive a hard copy of.

Not that it matters from my perspective, as I have a separate note in my SA file that captures interest received each month it is received. In that regard, having non interest bearing current accounts is helpful as it keeps the number of accounts at a lower level than you might otherwise need. When I used to use Microsoft Money and the bank imports worked then the more accounts wouldn't be an issue but I binned that off maybe 17 or so years ago!

I've done a bit of rationalisation recently but even so, I still have 6 current accounts in addition to 7 "savings" accounts. Each current account is there for a reason and never really holds more than a few hundred pounds - collectively between receiving my salary/rent and paying my mortgages there might be a few £k in but moving that around for interest rate purposes only to then move back for the DDs would be a step too far even for me!

[tlf67482]

Do savings institutions report your interest to HMRC? - Yes
Do they do it "for you" - No

They do it so HMRC can risk assess to see if you have anything to report to them. You are required to report income to them if you have income that hasn't been taxed at source and is liable to tax. If you are asked to complete a Self Assessment of course you declare it on that. If not you must contact them before 5 October following the end of the tax year to advise them of the income.

HMRC may use the information they have to adjust your tax code.

When you complete a Self Assessment online it will automatically allocate Personal Allowances (including the Personal Savings Allowance) and rate bands (including the starting rate for savings) as appropriate. You will be able to see how this has been done before you submit it.

More information at https://www.gov.uk/self-assessment-tax- ... tax-return

I think the main problem here is the line "HMRC may use the information they have to adjust your tax code".

I read another article in the press yesterday saying people do not need to do anything as HMRC will automatically adjust your tax code.

So will they do it for you or not? I guess it is no, may do or yes depending on what you read.

If people are relying on articles in the press they may be going to be in for a shock when HMRC starts writing to them!

[kempiejon]

I checked my tax code online and saw this new tax year now has been adjusted to the tune of £48 for untaxed income on savings and investments. I'm not sure where they got that figure from as I'm on top of my savings and investments so as to be below the thresholds.

[Lootman]

HMRC may use the information they have to adjust your tax code.

i think the main problem here is the line "HMRC may use the information they have to adjust your tax code".

I read another article in the press yesterday saying people do not need to do anything as HMRC will automatically adjust your tax code.

So will they do it for you or not? !

Millions of people pay tax but do not have a tax code, so the system cannot rely totally upon tax codes.

The codes are really just an administrative convenience for the taxman for a very limited number of sources of income, enabling the taxman to collect taxes due earlier than otherwise.

Personally I much prefer having no tax code, no withholding and just settle up annually in arrears. The money is better in my hands than theirs.

[ursaminortaur]

i think the main problem here is the line "HMRC may use the information they have to adjust your tax code".

I read another article in the press yesterday saying people do not need to do anything as HMRC will automatically adjust your tax code.

So will they do it for you or not? !

Millions of people pay tax but do not have a tax code, so the system cannot rely totally upon tax codes.

The codes are really just an administrative convenience for the taxman for a very limited number of sources of income, enabling the taxman to collect taxes due earlier than otherwise.

Personally I much prefer having no tax code, no withholding and just settle up annually in arrears. The money is better in my hands than theirs.

HMRC may not have informed you about it but you will have the default tax code of 1257L which means you are entitled to the standard personal allowance.

[Gersemi]

HMRC may not have informed you about it but you will have the default tax code of 1257L which means you are entitled to the standard personal allowance.

Not really. HMRC only create a tax code if you have a source of income liable to PAYE. If not there is no need for a tax code, which is for the use of the payer, so they know how much tax to deduct when making payments.

[Lootman]

Millions of people pay tax but do not have a tax code, so the system cannot rely totally upon tax codes.

The codes are really just an administrative convenience for the taxman for a very limited number of sources of income, enabling the taxman to collect taxes due earlier than otherwise.

Personally I much prefer having no tax code, no withholding and just settle up annually in arrears. The money is better in my hands than theirs.

HMRC may not have informed you about it but you will have the default tax code of 1257L which means you are entitled to the standard personal allowance.

But my point was that the tax code cannot universally drive tax payments since so many people do not have a code that causes withholding.

To my knowledge the only people who suffer withholding are UK full-time employees and those receiving UK occupational pensions.

PAYE codes and withholding do not exist or effect income from:

1) State pension
2) Investment income (dividends, interest, gains)
3) Rents and other landlording profits
4) Freelancers, independent contractors, sole proprietors and casual workers.
5) Foreign income sources