HMRC is going to use 2016/17 savings interest data received from banks and building societies (BBSI) to populate tax calculations and codes. This will apply to interest in 2016/17 PAYE tax calculations (P800s and PA302 simple assessments) and estimated interest in 2017/18 tax codes.
The introduction of the personal savings allowance from April 2016 means that the vast majority of taxpayers who receive interest income will be unaffected because their interest income is below the allowance.
It is important to note that the data being used is for sole accounts only.
Taxpayers who are in self assessment are not affected and should report their interest in the usual way.
HMRC recently contacted taxpayers affected by these changes to explain how the new system will work. HMRC has now confirmed that the system will go live this week. It anticipates the first calculations and tax codes will be received by taxpayers towards the end of this week, with numbers increasing from 4 December 2017.
We understand that HMRC has been holding back some PAYE calculations where there is an expectation of tax being due on interest, pending the use of this BBSI data. The interest figures in PAYE tax calculations should, as always, be carefully checked – particularly where the taxpayer receives income from a joint account, because HMRC will not have included this income.
Where the amount of interest in 2017/18 is expected to differ significantly from 2016/17 the taxpayer or their agent may need to contact HMRC to provide a more accurate estimate.
Please comment below on your experiences of tax codes and calculations which include interest figures derived from this data.