Thousands of savers may be at risk of overpaying tax after His Majesty’s Revenue and Customs sent them follow-up bills when some tax had already been paid.
Earlier this year, the tax office sent ‘simple assessment’ demands to some customers for the 2024-25 tax year which did not include tax owed on savings interest, according to reports in the Telegraph.
However, later on some savers received new tax letters from HMRC asking for tax on savings interest, as well as the amounts demanded in the first letter.
This was said to be the case even when the first bill had already been paid.
Simple assessments are used by HMRC when tax can’t be collected from someone’s income, for example a salary, but their tax affairs are otherwise relatively simple. It’s often used when people owe tax on savings interest or on a state pension.
Tax advisers have warned that savers who received these letters could end up paying far more than they owe to the taxman due to the confusion caused by the communications.
The affected savers are those who received 2024-25 simple assessments before October this year. While more than a million of these are expected to be sent this year, not all will have received them yet.
Tax demand: HMRC sent ‘simple assessment’ demands to some customers for the 2024-25 tax year which did not include tax owed on savings interest, according to the Telegraph
Joseph Adunse, partner at Moore Kingston Smith tax advisers, said: ‘In the rush to collect as much tax as possible, HMRC has been sending several simple assessment letters to bewildered taxpayers.
‘The problem is that the agency has bypassed its vast data warehouse and is sending affected taxpayers a total tax bill including tax that was demanded in an earlier letter.’
He added that there is a ‘real danger’ than overpayments would be made as savers panic over the letters.
Basic rate taxpayers can normally earn £1,000 of savings interest before they pay tax. This is reduced to £500 for higher rate taxpayers and no allowance is available for additional rate taxpayers.
Any money saved in a cash Isa is tax-free, and savers can put in up to £20,000 per tax year, so they should strongly consider using up this allowance first.
HMRC told accountants this month that taxpayers who received a simple assessment letter should deduct what they had already paid from their total so that they pay the correct amount.
An HMRC spokesperson said: ‘We can only send out simple assessment letters to customers who owe tax on savings interest after we receive this information from banks. Our letter clearly explains how customers can pay what they owe.’
Simple assessments are meant to allow taxpayers to make payments without completing a self-assessment return.
Last tax year, some 1.3million simple assessments were sent out by HMRC.
HMRC told accountants in its advice that it sends out second simple assessments where it receives information that savings interest may have been earned since it sent out the first simple assessment letter.
If a saver receives a second simple assessment letter, this will include the total tax figure owed for the year, including the amount that was set out in the first letter.
If a customer has already paid the first amount back, they will owe the amount set out in the second letter minus what they have already paid.
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