Paying back HMRC

[brokenbiscuitsadness]

last year I got divorced and eventually managed to the get the family home sold after an horrific 2 years. I was so desperate to escape I couldnt think long term so rented a property for 8 months. The equity sat in the bank and eventually I found somewhere to buy July 2025.

i did inform HRMC at the time but have just been slapped with a £1500 bill against interest paid. It’s the last thing I can afford.

Aside from whether it’s valid I don’t know what is the best approach to repaying it. HMRC have said I can pay some/all immediately or it can be taken from my salary on a monthly plan starting 2026.
does anyone have a view on which option is best? I don’t have £1500 but would find a away to get it if there are implications for repaying via a plan.

You can set up a repayment plan. They may ask for a breakdown of income/expenditure. It’s easy to set up a direct debit on a date of your choice and you can log in online to keep an eye on payments or adjust them. The other option is they deduct from your income monthly next tax year by adjusting your tax code

They usually take it from your PAYE and adjust your tax code accordingly. Since the banks stopped taking the tax out at source and passing it to HMRC on your behalf, anyone with interest over £1000 will get a letter saying they owe tax.
if you listen to BBC radio 4 Money Box aired last Saturday there’s a good explanation.

Goodness - two responses to this and evidently neither poster actually bothered to read your OP! I don't have any particular view on your best option but I imagine the drawback to a payment plan would be if they add interest to the £1500 owed. I would check that and check the rate - probably base rate but not necessarily. You could see whether the rate would vary according to the length of the plan you agree to. Good luck.

I don't think they charge interest on tax owed if it's not overdue and it's standard that tax owed is recovered using PAYE by adjustment of tax code.

To me, @Beebumble2 response seems to answer the question perfectly, assuming the taxable interest was earned in tax year 2024/5.

Thanks, I know because I’m in the continual loop of paying tax on my savings.😂. I don’t mind because in previous years the bank would have paid it and of course I’m earning the bulk of the interest.

Oh my days! Just listened to the Moneybox item - clear as mud! seems highly likely I may have already paid some of this charge then. HMRC just neglects to tell people that.
bracing myself for a tortuous phone call

Hi OP. I will be doing something similar shortly. I dont fully understand why they have given you a bill. What is is for? Tax payable on savings?

Is it because the interest you've received combined with wages is over your tax free amount?

Is it because you should have done a self assessment because the interest was over £10k.

it’s Interest on savings from housesale. I phoned HMRC who said this is now standard practice to get info from banks mid year.
really annoying as I did inform HMRC soon as I received the money into my bank and assumed there was nothing owing

Log on to the HMRC website and it does say they will let you know (usually by Nov, but running late this year) if you owe them any tax for the previous year and that it will need paying by end of Jan 26. Letting them know about your house sale was good but until they can look at the whole of the financial year......

I agree, hate having to pay tax on interest over £1,000, but it’s still better to have the money in a savings account getting any sort of interest. We have different savings accounts, but make sure we use ISA’s full allowance to get tax free interest. Unfortunately, I doubt the government isn’t going to change this any time soon. DH and I are retired so any tax from interest is deducted from our private pensions, my DS has his deducted from his salary.