Taxed on my savings

[ExitPursuedByABare]

I’ve not had to fill in a tax return for a few years since we closed our business down. I inherited some money a couple of years ago and put it in NS&I bonds. I didn’t tell the taxman (slapped wrists) about these bonds but they have suddenly changed my tax code and when I checked my account on the HMRC website they have clearly found out about the bond interest - presume the bank submitted the information. They have put the same figure in for next year as this year which is incorrect as the rate has gone down and I’ve taken £20,000 to put in an ISA.

Does anyone know how far back they can go with claiming tax on interest, have banks only just started informing HMRC and is it best to phone them or email?

Agree this strategy of taxing you for the next year as if you are going to make the same interest is just plan wrong
Obviously interest rates have fallen and your capital invested can decrease as well .
However trying to contact HMRC to query this impossible
Presuming we will get tax rebates for overpaid tax ?
Or am I being a trifle optomistic ?

I very much hope a rebate will be forthcoming but I’m not holding my breath.

I always assumed putting money into anything NS&I is informing the government!

All savings apart from ISA have the interest taxed at 20% it is just if you are a higher rate tax pay you need to pay the additional interest.

I thought they could go back 6 years but I could be wrong. I think you need to ring tax people and tell them it was an oversight. Move £20k each April across onto an ISA so at least some will be tax free. You would need to ask for tax rebate otherwise they make you wait until end of tax year.

You did try to avoid paying tax so I don’t think they are wrong to change your tax code

Premium bonds wins are tax free.
Sorry just saw you mrant just bonds, yeah. They tax

This! NS&I is UK Government..it's not a bank as such.
Anyway, You didn't do anything wrong.

I'm in a similar situation - my tax code was changed and it turns out I hadn't been paying the right interest on savings so have to pay about £5k over the course of 2026. Not happy about this!

This is Grok's answer to your query

OP. I'll try to help with your questions based on the current UK tax rules – I'm not an accountant, so this is general info, and you might want to double-check with HMRC or a pro if your situation's complex. Sounds like you're on PAYE (since they adjusted your tax code), and the interest pushed you over the Personal Savings Allowance (£1,000 for basic-rate taxpayers, £500 for higher-rate).

On how far back HMRC can go: It depends on why the interest wasn't declared. For "careless" mistakes (like forgetting to report), they can usually go back up to 6 years from the end of the tax year.

If it was a simple error or "innocent," it's often 4 years.50c1b9 But if they see it as deliberate non-disclosure, it could be up to 20 years (though that's rarer for straightforward savings interest).

Since NS&I reports interest automatically to HMRC each year, they might already have data going back, and could adjust for past years if tax was due (e.g., via a P800 calculation letter or assessment).

If you haven't heard about back taxes yet, it might not be an issue, but best to ask them directly.

Banks and NS&I haven't "only just started" reporting – they've been required to report interest paid to HMRC annually since at least April 2016 (when the Personal Savings Allowance came in), and even before that for some cases.

NS&I, being government-backed, definitely shares this info automatically, so yeah, that's how they found out.

From 2027, reporting might get even more detailed, but it's not new.

For contacting them: The best first step is to log into your HMRC personal tax account online (via GOV.UK) – you can check your tax code, see the interest figures they've used, and even update them about changes like the rate drop and your £20k ISA transfer.

If the estimate for next year is wrong, tell them ASAP so they can adjust your code before it affects your pay/pension. If you prefer to speak to someone, phone the Income Tax helpline on 0300 200 3300 (have your NI number ready).

Email isn't a standard option for this – they prefer online or phone for security. If the interest means you now need to do Self Assessment (e.g., if it's over £10k total savings income), you might have to register for that too.

Don't panic – lots of people get caught out by this, especially with rates rising lately. If there's back tax owed, acting now could reduce penalties (they're more lenient if you come forward).

Good luck!

Log into your online self assessment account and submit a form to reduce payments on account, so you won’t be paying tax that you won’t owe. Banks have been notifying HMRC for some time now, so I doubt you will have to do anything your end,

.. Not sure it's correct to say all savings is taxed at 20% outside an ISA... Depending on Tax band you can get £1000 tax free interest

you can sign in online and there is a box you can fill in the details and inform them you have changed the £20,000 to a tax free ISA therefore the tax will not be the same for next year - this may take them a few days to read and act upon, but hopefully you'll then find they lower the amount of tax you are due. Plus it is far easier than telephoning and trying to be on hold for hours

Savings aren’t taxed at 20% outside an ISA. Interest is paid gross. This is because as stated above you can earn £1,000 tax free savings as a lower rate tax payer, and £500 as a higher rate tax payer. If you don’t submit a self assessment (and you don’t have to if interest is less than £10,000 and there’s no other reason to) then HMRC will take via your tax code. Tax codes will be set based on prior year earnings. Technically your responsibility to report any interest HMRC don’t appear to be aware of. Best way to get accurate tax can be to submit a self assessment.

If you’ve moved £20,000 from a government bond into an ISA you’re talking about tax savings on 3.75% interest give or take (depending what term your government bonds were). So £750ish. If you’re the highest rate tax payer that’s £34ish per month. If you’re not it’s less. My point is moving £20,000 of your bonds into an ISA is not a very big impact?

They will adjust next year's tax code next year to adjust for any under / over payment as a result of earning more or less, whether that be from income, savings interest or any other source.

I wouldn't bother trying to call or email. If you want to communicate a change of expected income sooner (rather than let it work itself out in time) the best way is to log on to your account and fill out the appropriate form. But you don't need to, it will be right (eventually).

Go self assessment
you’ve done nothing wrong you don’t have to tell them the banks send annual statement off how much interest you earn then you get billed for the tax
only thing is the statement for the end of the tax year in match doesn’t get sent to HMRC till about December then they have to deal do you can be well over a year behind
far easier when tax was deducted at source by the banks
personally I work out tax when I get my annual statement with interest it’s 20% sit on it for a few months then pay it directly to HMRC

No they dont, it depends on your highest tax rate and the amount of interest you earn
You should be declaring if you need to pay tax.

Interest hasn't been taxed at sources for years