AIBU to find HMRC really confusing?

[Hmrcmakesnosense]

To preface - I know I am very fortunate to be in the position where I have enough money to owe tax and I absolutely do not mind paying it

BUT - I am completely baffled by HMRC, tax codes, untaxed interest and tax returns.

Two and a half years ago we sold our house and have been renting in the catchment for the school we want DC to go to. Eldest is there, hopefully youngest will get in next year. The plan is then to buy and not have to worry about catchment.

As a result, I have had quite a large sum sitting in cash in my account - I have been using NSandI 1 year bonds and the interest paid so far has been in tax year 24/25 and the current tax year. DH pays 40% tax and I pay 20% so we decided this was the best way.

I contacted HMRC via their webchat as I wasn't sure how to declare the interest and was told that, although they are given interest data from banks, as I have received over £10,000 interest I still have to do a tax return.

I owe just under £2,500.

I duly set up my account. Started the return and all seemed ok. First mistake - DH told me not to submit it until January otherwise we would have to pay the tax immediately and it would be better to have it in our account longer... (I just wanted it sorted!).

Then in early December I get a notice for a tax code change - my payroll department called to query it as it takes me into a negative personal allowance. I did not understand the figure they have quoted for unpaid tax, it bears no relation to what I actually received. I tried to call HMRC (couldn't get through), used the web chat but got nowhere - was told I still needed to do a tax return and that "it would all sort itself out in the end".

I panicked, updated my tax return with the new tax code, ticked the box to pay now and it spat out a number I needed to pay (£970) - I paid it.

Got my payslip today and I have been deducted additional £600 tax. Which is more than I thought it would be based on the HMRC figures on my coding notice (but makes sense in terms of the real figure that I owe as there is only 4 paydays left for the tax year). I had anticipated £250 additional being deducted and planned on that basis.

So now DH is annoyed at me saying I shouldn't have done the return at all, HMRC clearly have it all in hand and now I have paid almost £1k for no reason.

TBH I prefer paying a bit more now as it should hopefully mean less going out next year when we will (hopefully!) be in the process of moving. I think I have paid on account for next year - it really isn't clear. However, it now leaves us short from what we budgeted for as my pay will be down £600 a month until the end of April.

BUT - the process has been so difficult! I have no idea what figures HMRC are working from, the coding notice makes no sense (my payroll also said the figures I gave them do not match) and it is impossible to contact them.

I am relatively intelligent (honestly!)and tech savvy - how would an elderly person (and probably more likely to have this level of savings) cope?

Aargh - surely there must be an easier way? HMRC could share on your tax account what reports of untaxed interest they have received and you can confirm/ amend them?

I agree that tax is confusing, even for intelligent, tech-savvy people. I find the online filing system scary because clicking on the wrong box can take you to a screen you might not actually need to see. I don't like groping around the tax form blindly.

Have you googled the meaning of your new tax code? That might give you some idea(s).

I think part of your problem is that somewhere you have clicked on a box which allows HMRC to collect your tax through your salary/employer rather than you making a one-off payment (which it sounds like you were preparing to do). I don't know how to undo this but I think it's why your wages are now being garnished.

I have, in the recent past, had success talking to a human at HMRC but I did have to hold for a while and in these next few weeks, as the deadline for online filing looms, the hold time will be longer since many more people will be calling.

Good luck!

Yes, I think the issue lies with me submitting the tax return after HMRC had amended my tax code.

No way will I attempt to call over the next few weeks - they will be inundated and it isn't like we are going to starve as a result.

I'm also confused as the tax return that is due now is for the tax year ending 05/04/2025 and I dont think the tax code should have been changed for this return - other posters can correct me if im wrong.

The return for 05/04/2025 is due to be paid no later than 31/01/2026, so I don't really think the interest you would have earned in that period would have been significant (depends on how much your payment was)

If the liability is more than £1,000 you have to pay the amount due and half on account now and the other half in July 2026.

You can check the tax year income recorded on your account to see if you were on the correct tax code for the relevant period, if you have paid enough in previous years, you should have your full code available. I also think as soon as your payment is received by HMRC, your tax code should change again to the correct one.

This is my understanding, but like I said other posters can correct me if I am wrong.

If they’ve asked you to do a tax return then you have to complete one and they will fine you if you don’t do it on time - so you did the right thing there.

You can see your PAYE codes on the online system, and try and work out what they’ve done. I assume they’ve maybe added the interest to your code. Possibly an estimate for the current tax year (2025/26) whereas your tax return will be the interest for the prior tax year (2024/25)?

It will most likely sort itself out eventually, but it’s probably best to try and speak to a human. Getting through is a total nightmare.

Also for next year - best to do the return asap so you know where you stand - you don’t have to pay until 31 Jan.

I do our tax returns in the summer (when I’m organised - to be fair I’m not always!) Then set a reminder to pay the money by 31 jan. That way HMRC doesn’t get my money any earlier than it needs to!

I have no advice but I am also thoroughly confused by HMRC. I get an email
about once a month to tell me my tax code has changed, it’s always gone down and I pay huge amounts of tax each month.

They are impossible to contact via phone.

I didn’t even know I could opt out of having my code automatically adjusted. I’d far rather pay whatever I owe and have a normal tax code for my income.

If it makes you feel better I am a finance professional with over 20 years experience and I find my dealings with HMRC utterly cryptic and baffling.

I do seem to get the calculation right in the end but the messages HMRC send are unhelpful my complicated.

It might be worth getting someone to look over your tax return. It’s not that expensive.

You don't need to pay anything when you complete your tax return, HMRC will calculate what you owe and if necessary you have to pay by 31st of January. There should also be an option on the form to pay by PAYE if you don't owe too much.

They may have adjusted your tax code to collect the outstanding tax or it may have been adjusted on the assumption you will earn the extra income again next year so you don't under pay again. It will come out in the wash one way or another, they may change your tax code again when they process your online payment. You could check your current position and payments received on line and if you are sure you have paid too much you can ask for a re-payment. It should also tell you what if anything you have to pay by January 31st.

I’ve worked at a senior level in finance for over 20 years; I’m a qualified chartered accountant (ACA) and qualified chartered tax advisor (CTA), and I wholeheartedly agree that the UK tax system and the way HMRC administers it is far too complex.

I’ve had 5 tax code change notices this year, as I’ve had 2 or 3 employers at any one time (day job plus Non-Execs), plus I own a rental property. I ignore them all, as with real-time information (RTI) they are correct that everything will right itself by the end of the tax year.

It’s also worth knowing that you can set up a payment plan for underpaid tax, as I found I had to do when I had an unexpectedly large bill last year (due to my last employer not correctly applying the coding changes, and personal allowance when I shouldn’t have had one).

Thanks everyone - glad to know it isn't just me, I feel like such an idiot.

good to know I can submit the return and then pay in January next year. I will do it in April this time.

You need to distinguish the tax years in your mind (although without exact numbers it’s hard to follow exactly what has happened).

You are doing a tax return for 2024/25.
Your tax code is collecting tax for 2025/26.

You should have submitted your 2024/25 return and paid the £2.5k tax on the £13.5k interest. You won’t have paid on account for next year as you won’t meet the requirements to if the vast majority of your income is from wages or salary.

Then because HMRC know you’re also going to have to pay £2.5k tax in 2025/26 (as they assume your circumstance stay the same each year) they have adjusted your tax code so that you pay £600 more in tax for the next 4 months, thereby covering the £2.5k. Because there’s so little of the year left, and you’ve already has 9/12 of your personal allowance, this is why they’ve had to put you into a negative personal allowance for the remaining 3 months so that it triggers the £600 per month to cover the tax due.

The bit I can’t comment on without numbers is why you only paid £960 this year. It might be that you’ve overpaid tax on your monthly PAYE so have a bit of a credit - or you’ve made a mistake as I’m not sure why you’ve updated your 2024/25 tax return because your 2025/26 code changed?

It’s odd they would put in previous year’s tax into your current year’s tax code without you having first submitted a return (and even then it’s normally only adjusted for the next year), so have you possibly deducted some of this year’s tax in last year’s tax return?

If you can share exact numbers and/or the breakdown of your current tax code they both would help me be more precise.

Different tax years!

Your 24/5 tax return is last year.

Your PAYE code is for the current tax year 25/26.

Two completely different beasts.

You can see online how your PAYE code is made up and it should show on it the adjustment for interest. If it just says "interest" it's for the 25/26 tax year. If it says "underpayment" or "estimated underpayment" it will be for the 24/25 tax year.

I think that HMRC have adjusted your current year 25/26 tax code triggered by you phoning and telling them of your interest.

It doesn't help that HMRC don't do anything quickly, so the issuing of the PAYE code could be weeks after you phoned them, and it's just a coincidence that they've issued a new PAYE code straight after you submitted the SA return.

As others have said, submitting a tax return doesn't trigger you having to pay immediately - you still had until 31 January to pay it. HMRC's system just gives you the option of paying upon submission - it's not mandatory.

It's all a shambles unfortunately and the people on the phones at HMRC often have minimal training and don't understand their own systems.

Oh maaaan I am even more confused now - so the tax going out of my pay now is for 25/26.
I paid £970 and also ticked the box to collect unpaid tax via my tax code (did not realise I had done this, I thought it said to pay now and I had ticked that) so I will probably end up with an even more negative tax code?

I guess it will sort itself out eventually? Or should I try to call in March/ April when hopefully things are quieter?

The figures I have put on my tax return and the calculations match my own so I guess the only issue is the method of payment and how/ when that happens? If I have given them all the information then I am not going to get into trouble?

@Hmrcmakesnosense
You usually have two tax years to consider

• the current one 2025/26
• the previous one 2024/25.

You need to be clear which tax year you are looking at.

Previous tax year 2024/25

• The self assessment deadline for this tax year is 31/01/2026.
• You sold your property in 2023 and invested the capital
• As the taxable interest in the 2024/25 tax year was over £10k you need to do a self assessment
• As soon as you submit your 2024/25 self assessment they calculate the tax.
• However you still have until 31/01/26 to pay the tax.
• If you submit your self assessment early enough you sometimes have the option to have your tax recovered via your tax rather than paying.

Regardless of whether or not you do a self assessment HMRC will be getting information from both your employer via PAYE and banks about what interest you actually received in 2024/25. They will use this to calculate your tax for 2024/25.

Roughly each December after the tax year end they adjust your tax code for the current year 2025/26 to recover owed tax for 2024/25 and the tax they predict you will pay in 2025/26.

The problem doing the tax code adjustment in December is, as you have found out, you get hit with a huge recovery from your salary. The £600 is 9 months extra tax I.e. £67 a month. It’s likely next month the recovery will be c£67 but I can’t guarantee that without seeing your figures.

If you haven’t done so submit your 2024/25 tax return asap. If the £940 you paid related to 2024/25 they will recalculate your 2025/26 tax code and you may get a rebate via your salary.

My advice is don’t panic when you get communications from HMRC. Make sure you really understand your tax and whether you will pay as a lump sum or via PAYE.

Amended to correct myself.

As long as you have given accurate figures you won’t get into trouble.

So, so confusing. I called them for help and the person who assisted me made me feel very small and thick.

Self employed or not HMRC are awfully confusing and everything takes so long to action. I have a company car and I can’t tell you the chaos it has been. Due to errors from my work place and HMRC I have a negative tax code, a rebate, a demand for tax but then told I can’t just pay and then constant adjustments because I’m not earning as much as they thought or I’m earning more. It’ll probably be sorted just as I change car and then go to shit again.

I'm in Ireland and have no problems dealing with our Revenue here whether it's payroll, income tax, allowances etc.
We have a few employees under HMRC and their system is baffling. I don't know how you all put up with it.

Tax codes are a nightmare. I made the discovery a few weeks ago that if something is coded into your tax code and you'd rather just pay it the only way to do so is send them a cheque in the post 😱 still waiting to hear if that has fixed my colleague's tax code or not ...

FYI for anyone in this position - if you work past State retirement age yes the state pension is taxable and it is much easier to try and get it in your tax code from day 1 than wait for HMRC to catch up with you. It won't be 100% accurate but it will be close enough.

Yeah this is what I had. They said they would action it within 30 days of receipt but I question what receipt means when it took them half a year to receive the amendment. I said who even has a cheque book now and they said I could get one from the bank. My nearest bank was open 10-3 and is now closed. Living in 1900.

I don’t submit a tax return. I don’t even know if I should. It’s a minefield.

Broadly speaking, you are supposed to submit a self-assessment tax return to HMRC if you earn any income which isn’t automatically taxed at the right percentage, or isn’t taxed at source e.g. over £10k bank interest, investment income or rental income.

HMRC want to know from you how much you have received and the expenses you are deducting against them, so your tax can be calculated and paid 10 months after the tax year.

You are also supposed to submit a self-assessment tax return to HMRC if you earn over £100k via PAYE.

I keep getting emails saying my tax code has changed and my tax free allowance is less and less, iam on paye pt job, the figures of tax iam supposed to owe change every month, I don't understand it at all

I was incorrectly informed 3 or 4 years ago that I owed more tax because of some additional income, which was a PPI claim that I paid tax on before we ever saw it as it came from a bank rather than a loan company or other financial institution. I wrote 3 letters to HMRC over 9 months, first class post, then recorded delivery and finally cc to my MP. Strangely enough, it was only when the MP got involved, and finally they paid me back what I was owed with another £100 as an apology.

If you continue to get no joy, bring in the “big guns” but that depends on who your MP is.