Pictured above: Helen Draper MMath(Hons) FCA
With savings rates having risen significantly in recent years, more people are now earning interest above their Personal Savings Allowance (PSA). If your personal allowance is already fully used against salary, pension or other income, any taxable savings interest may create a liability that must be reported and paid. It is important not to assume that HM Revenue & Customs (HMRC) will always contact you automatically, or that any figures it holds will necessarily be complete or correct.
HMRC receives some savings data directly from banks, building societies and other financial institutions. It may then use that information to issue a Simple Assessment, send a tax calculation or amend a PAYE tax code to collect any tax due. However, taxpayers should still review their own position carefully rather than relying solely on HMRC’s systems.
Where total savings interest exceeds £10,000 in a tax year, a Self Assessment Tax Return is generally required. Recently, HMRC issued notices to around 120,000 individuals requiring them to file 2024/25 Returns after identifying savings income above this level from information supplied by financial institutions. In some cases, individuals may already have received a Simple Assessment for the same income, so it is advisable to review both your savings records and any HMRC correspondence carefully to ensure that the correct action is taken.
Now that the tax year ending 5 April 2026 has passed, this is an ideal time to review the total interest earned across your bank accounts, building society savings, and other investments for 2025/26. ISA interest can be ignored, as it remains tax-free. For most taxpayers, the PSA is £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers and nil for additional-rate taxpayers. Interest above those limits may result in tax becoming payable. If a 2025/26 Tax Return is required because your savings income exceeds £10,000, you should notify HMRC of this by 5 October 2026, unless they have already issued you with a Return of course.
If you believe you may have a liability, or would like help reviewing your position or understanding correspondence from HMRC, we would be pleased to assist. We can help calculate any tax due, advise on the appropriate reporting route and deal with HMRC on your behalf, reducing the administrative burden and helping you avoid unnecessary penalties or confusion.
The above is for general guidance only and no action should be taken without obtaining specific advice.
Pearson May Chartered Accountants & Chartered Tax Advisers
Bath, Trowbridge and Chippenham
Tax giving you a headache? It pays to get professional advice.
At Pearson May we specialise in a full range of accountancy services to help you maximise your profits and minimise the tax you have to pay.
Call Bath 01225 460491
or visit pearsonmay.co.uk
