Paying tax on savings interest

[AgreeableDragon]

My Mum has earnt interest on her savings in 2023/24 totalling just over £2,000. She does not do self-assessment, and gets a smallish pension- over the personal threshold.

Looking at the HMRC site, I think the banks/building societies will notify HMRC and they will tell her if she owes tax.

This seems simple, but I'm wondering if this is correct? Does anyone have any experience of this?

I really do not want to have to help her do a self-assesment for various reasons that are not relevant.

(Moving forward she now has the majority of her savings in ISAs.)

https://www.gov.uk/apply-tax-free-interest-on-savings

Yes unless the interest is over 10k, it should be OK and everything be done automatically. I assume she receives her pension in the UK so her tax code will be adjusted to reflect what tax she owes.

I had recent experience of this and have received a letter to say I owe them and they'll take what I owe through PAYE

Pretty sure she doesn't have to do anything - HMRC should just adjust her tax code accordingly.

However, if her income is only just over the personal allowance then she should get the 'starting rate for savings' and probably no tax is due anyway.

If your mother's income is less than £17570, then she will benefit from the starting rate for savings, which is in addition to the £1000 savings allowance. It would be a good idea to move some cash savings into an ISA to avoid tax liability. Trading 212 for example is an instant access ISA, which is also flexible and pays 4.9%

www.gov.uk/apply-tax-free-interest-on-savings#:~:text=Your%20starting%20rate%20for%20savings%20is%20a%20maximum%20of%20%C2%A3,for%20savings%20by%20%C2%A31.&text=You%20earn%20%C2%A316%2C000%20of,Personal%20Allowance%20is%20%C2%A312%2C570.

I am in a similar position and, for the first time since I retired, I've had to pay tax. I get a state pension and income from savings (the banks etc told HMRC how much they gave me for the tax year April 23/end March 24) and I went over the personal and savings allowance. However, they did not adjust my tax code as I don't have one! I queried this with HMRC but got nowhere. Anyway, they sent me a tax demand in August (I think?) to be paid by end December (again, I think that was the deadline). Paid up as soon as.... (never fall out with the tax man as my mum used to say) and my online account is zero ago. I've no idea how they arrived at exactly £250 though, perhaps it was guesswork? But, no change in tax code, paid lump sum on demand.

I’ve just been clobbered with an £800 extra tax bill on tax on interest with savings, so, yes, banks etc do notify them. 🙄

Such a useful piece of information !

Unfortunately there is no mechanism to deduct tax from your state pension. If you had a private pension then the tax would be deducted from that. It would be a good idea to move some of your cash savings ean ISA to reduce your tax liability.

Yes, I put the full amount in an ISA each year so, gradually....!

Thank you so much everyone, you’ve all been really helpful.😊