Extended period for issuing tax calculation (P800) letters
Each year HMRC issues tax calculations called P800s for those not in self-assessment to collect any extra tax on items like savings interest and benefits. Normally these are issued between July and November following the end of the tax year.
In December 2024, HMRC included a note in Agent Update 126 to warn taxpayers that for the 2023/24 tax year, this process will not be completed until March 2025. This is in part due to the sheer volume of bank interest information that HMRC has received for 2023-24.
Impact for savers
Most savers are able to receive an amount of savings income tax-free thanks to the Personal Savings Allowance (PSA). But following increases to interest rates in 2023/24, many more individuals are expected to have tax to pay on their savings income as they exceed their PSA limit.
The PSA is applied to any interest earned on accounts other than ISAs. Interest on funds in ISAs is tax free and can be left out the calculation. The PSA depends on your income. Basic-rate taxpayers can receive up to £1,000 of gross interest before they need to pay tax, while higher-rate taxpayers earning more than £50,270 and paying tax at 40% have a lower allowance of £500. Those earning over £125,140 and paying additional rate tax must pay tax on all their savings income, as the allowance for these individuals is zero.
For those in self-assessment, any tax on savings will be collected as part of their usual tax reporting obligations. Taxpayers in self-assessment should supply full details of their savings income when completing their 2023-24 return.
For individuals who do not need to be in self-assessment, such as employees or pensioners whose tax is usually deducted at source via PAYE, HMRC receives details of their bank and building society interest each year and then carries out a reconciliation to match the data received to individual taxpayer records. As a rule, HMRC will only accept savers with income of more than £10,000 into self-assessment, unless they need to be in self-assessment for other reasons.
Individuals who are not in self-assessment, but know that they have exceeded their savings allowance, have now been asked to wait until the end of March to see if HMRC issues a demand for the tax automatically. If not, they should contact HMRC after that date to advise them of their savings income.
ATT comments
The ATT has been asking HMRC for some time to provide further guidance for savers to confirm their position regarding reporting any tax due on savings interest.
While HMRC guidance indicates that they will take responsibility for calculating any tax due based on information received from banks and building societies, under the law, the taxpayer has a responsibility to register and pay tax if it’s due.
The ATT understands that it is easier (and cheaper) for HMRC if they can rely on the bank reconciliation process, but this is not infallible and the ATT has been asking HMRC to make it clear to taxpayers when they should contact HMRC if they have not received a computation. The ATT therefore welcomes the clarification from HMRC that the P800 process is taking longer than usual this year and we look forward to further commentary being added to GOV.UK.
Text of HMRC announcement
The following announcement was shared by HMRC in Agent Update 126:
Due to higher-than-expected volumes, some customers may have to wait until the new year to receive their P800s. This includes some PAYE customers who think they may have additional tax to pay on savings for the year ending 5 April 2024.
This is slightly longer than in previous years where HMRC have aimed to complete most end-of-year PAYE reconciliations by the end of November. The process will be complete by the end of March 2025 and PAYE customers are asked not to chase until after that point. GOV.UK guidance is being updated to this effect.
Information on how to contact HMRC regarding Income Tax enquiries can be found on GOV.UK.