Check the savings interest figure included in your tax calculation – it’s not always correct.

HMRC use information sent to them by banks and building societies about interest paid to you to collect any tax due on that income. HMRC may include the figures in any calculation of your tax liability they issue (for example, a simple assessment or a P800). They may also use the figures to amend the tax code that your employer or pension payer applies to your employment or pension income. A change in your tax code can affect the amount of your take-home pay.

Top tip: HMRC’s savings interest figures are a useful starting point, but they should not be treated as definitive. Ultimately, you are responsible for ensuring that the correct amount of taxable interest is reported. The fact that HMRC receives information from banks and building societies does not remove the obligation on you to notify them of your need to do a self assessment tax return, where appropriate.

We have been hearing of instances where the figures being used by HMRC for savings interest may be incorrect. Sometimes the figures are not actually wrong, but just look unfamiliar. Other times, they may look wrong because they actually are!

Here we explain why this can happen and tell you what to do if you think this might apply to you.

Why the interest figure might look wrong

If you don’t immediately recognise the interest figure shown on your tax calculation it is important that you check it carefully to make sure that you pay the right amount of tax on your savings income. We tell you how to do this below.

Some common reasons why the figure may not look right to you include the following:

Interest from more than one account

If you have more than one bank or building society account, the figure shown on the calculation will probably be the total amount of interest paid to you in the tax year, across all of those accounts. You will need to add up the interest paid on each of your accounts to work out your total interest for the year and compare this to the figure in the tax calculation.

Estimated figures are sometimes used

Where HMRC have not received up-to-date information about your savings interest, they sometimes use estimated figures, often based on the interest you received in the previous tax year. These estimates may not be correct for the tax year in question. For example, the estimated figures may be based on accounts which are now closed or which held a large amount of funds (for example, from a house sale) that have now been withdrawn. 

Recently opened or closed accounts

Make sure that you have remembered to check interest paid on any accounts which you opened or closed during the tax year, as those amounts should be reported to HMRC.

Forgotten accounts

It is also important to remember that interest from dormant or low-balance accounts (including ‘forgotten’ savings accounts) should still be reported to HMRC.

Errors

As we explain above, after the end of each tax year HMRC receives interest information direct from banks and building societies. You can read more about what the banks and building societies send to HMRC on GOV.UK. Given the vast amount of data being sent, perhaps of varying quality, it is not surprising that errors like the following can sometimes crop up. They may arise due to the way the data is presented by the banks and building societies or when the data is matched to taxpayer records by HMRC:  

Basic errors 

Basic errors such as duplication of interest figures and recording the interest against the wrong tax year can easily occur.  

Non-taxable interest 

Some savings income is tax-free and so should not be included in your tax calculation. We have heard of instances where interest from ISA accounts, which is not taxable, has been incorrectly included in the data.

Joint accounts

If you hold an account in joint names, only your share of the interest should be included in your tax calculation, for example, your 50% of interest on an account held in joint names with your spouse or civil partner. The interest should usually be allocated evenly between all of the account holders unless they have unequal interests in the account and HMRC have been notified (via form 17) that a different allocation should apply. 

Managing an account for someone else 

This might apply if you hold the account for a child, or if you are named as a power of attorney on an account. Although the account may be in your name, the underlying funds belong to someone else, referred to as the  ‘beneficial owner’, and therefore the interest should usually be taxed on them (although there are some exceptions).

Fixed term savings accounts and bonds 

Interest on some fixed term accounts accrues over the whole term and is paid in a lump sum at maturity. This interest is taxable when it is paid, so any amounts accrued but not yet paid should not be included in your taxable interest figure on your tax calculation. 

Scrambled information 

Interest information can sometimes become ‘scrambled’ with another taxpayer’s information, meaning that HMRC attribute interest to you which does not relate to any bank accounts held by you. In rare instances, this may be linked to identity theft, that is, someone has used your identity to set up an account. You can find out more about this and what to do on the Report Fraud website. 

How to check the interest figure

Start by comparing the interest figure shown in your tax calculation with the amounts on your bank statements and certificates of interest. These should have been sent to you either by post or through your online banking service or app. If you don’t have access to these documents, visit or call your bank and ask them to confirm the interest figures for you.

You can contact HMRC and request a detailed breakdown of the interest figure they have included in your tax calculation. Contact details are set out on GOV.UK. They should be able to provide you with a breakdown including:

• the tax year
• name of the bank or building society
• name on the account
• the last few digits of the account number
• and the interest figure recorded for each account.

What to do if you think there’s a mistake

If you think the interest shown in your tax calculation may be wrong, you should contact HMRC as soon as possible. It is important to do this even if the incorrect figures do not appear to be impacting on your tax liability (for example, because they fall under relevant allowances), because incorrect figures in HMRC’s systems can easily cause problems later on – for example if they are used for tax coding purposes or rolled forward and used as estimated amounts in future years.

  If you have received a simple assessment calculation you will need to contact HMRC within 60 days to query any of the figures.

HMRC will ask you to explain why you think the figures are incorrect and may ask you to send evidence of the correct amounts, such as copies of interest certificates. HMRC may agree to issue a revised tax calculation. In certain situations, for example, in relation to scrambled information, they may ask you to contact the bank or building society concerned to discuss the data they have shared with HMRC and why it may not be correct.

In a recent consultation on making better use of bank and building society data, HMRC said: “HMRC will work with data suppliers to explore ways to enable transparency, and to agree clear processes for challenging potentially incorrect data, between the data supplier, HMRC and the taxpayer”. However, we understand that there have been some instances where HMRC have only agreed to amend their records once the relevant bank/building society has checked its information and either revised it directly with HMRC or confirmed in writing to the taxpayer that it is incorrect. This does not seem a satisfactory situation, and we intend to discuss this further with HMRC.

And finally …

As well as checking the savings interest figure, it is worth reviewing your tax calculation as a whole. For example, you should check that your tax calculation includes any of your outgoings that may reduce your overall tax liability, for example unreimbursed employment expenses. If you pay tax at above the basic rate, ensure that any pension contributions and gift aid donations you have made in the year are also included as you may be due some additional tax relief. Contact HMRC if you need to have any of these amounts added to your calculation.

We have more information on checking Simple Assessments and P800s on our website. You can also find some guidance on how to check your tax coding notices, which we hope will be helpful.