Tax codes are changing with the HMRC app saying savers have a deduction on their tax-free allowance.
HMRC sending letters to ‘everyone who has savings’ with new tax codes. Tax codes are changing with the HMRC app saying savers have a deduction on their tax-free allowance.
HMRC is doing this to everyone who has savings. It means your bank has reported that you have savings and they have calculated based on the interest reported a deduction in your personal allowance.
Steve Webb, former pensions minister and partner at LCP, said: “HMRC will normally collect underpaid tax through a change to your tax code, so it would be a nasty shock if you only find out at the end of March about a change that will happen within the next week.”
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Laura Suter, director of personal finance at AJ Bell, said: “We know that lots more people will be landed with unexpected tax bills this year as they have breached their tax-free savings allowance and will owe tax on their savings interest.
“But this latest warning from HMRC means some people won’t find out they owe additional tax until just days before the new tax year, when their new tax code will kick in. For many, it will leave their pay packet short with very little notice.”
Senga Prior, ATT President, said: “Strictly speaking, if an individual has interest which needs to be taxed they are required to register with HMRC within six months of the end of the tax year – unless HMRC sends them a tax computation.
“There are two problems with this – firstly there have been so many computations needed for 2023/24, that HMRC has only now finished issuing them, around five months after the registration deadline.
“Secondly, HMRC’s matching process is not perfect. They receive information from around 130m accounts and they have recently confirmed that they are unable to match around 1 in 5 bank accounts to their taxpayer records, which means approximately 20% of accounts are being missed.
“We raised concerns last year that, given these issues with the matching process, HMRC’s guidance to savers not already in self-assessment to simply leave it to them was not adequate. In December, HMRC updated their guidance to confirm that taxpayers who do not receive a letter by 31 March 2025, must contact HMRC as soon as possible to avoid a penalty.
“HMRC is making it clear that responsibility passes back to the individual to get in touch to pay tax, so we urge anyone who thinks they may owe tax on their savings interest to contact HMRC as soon as they can.”
