Press Release: Outdated tax information on savings may be costing you dear
The Low Incomes Tax Reform Group (LITRG) is advising taxpayers to check the accuracy of savings income figures shown in their HMRC PAYE Notices of Coding and tax calculations (P800 forms).
Kelly Sizer, Senior Technical Manager at LITRG, said:
“A number of taxpayers have contacted us recently having noticed that their PAYE codes for the current tax year, and tax calculations for previous tax years, have included out-of-date savings income figures. The majority are paying too much tax as a result.”1
LITRG is also warning that outdated savings information can mean people are not paying enough tax and might face a later tax bill.
HMRC issue employees and pensioners with tax codes that contain estimates for other sources of income. This is often done so that the taxpayer does not need to complete a tax return; instead, any tax due on other sources of income is collected through PAYE. But if HMRC do not update the estimates for actual figures after the end of the tax year, or if they simply carry forward an earlier year’s figure to later years, the taxpayer can end up paying the wrong amount of tax.
LITRG is urging taxpayers to check carefully their Notices of Coding and any tax calculations (P800 forms) they receive from HMRC to make sure they are paying the correct amount of tax. They may be due a refund and can currently claim refunds for any tax year from 2015/16 onwards. If they are due to pay more tax, it is best to have this corrected now.
Kelly Sizer added:
“HMRC receive information from banks and other financial institutions after the end of the tax year, but this might not always be entirely accurate or complete. It is the taxpayer’s responsibility to advise HMRC of accurate figures.
“People might pay too much tax where their savings income has gone down as compared to earlier years. For example, pensioners who are supplementing their income with savings may be earning less interest year on year as a result.
“Another example is people who have received Payment Protection Insurance (PPI) compensation,2 part of which is interest and is therefore treated as savings income. As a one-off payment, these amounts should not be carried forward in PAYE codes each year.”
- Due to the so-called ‘personal savings allowance’ (covering savings income of up to £1,000 for basic rate taxpayers), many people now do not in fact pay tax on savings income, and tax is not deducted at source from many types of savings income.
- Note that tax is deducted at source from the interest element of PPI compensation and a tax refund might need to be claimed for the relevant tax year.