HMRC begins taxing people on savings interest that isn't theirs

HMRC has taxed a taxpayer on £14,000 savings interest that wasn't his, he has said. This is Money reported the story from the taxpayer, who wrote in to the investigator Tony Hetherington's weekly column seeking urgent advice.

They wrote: "HM Revenue & Customs informed me that I had paid too little tax in 2022-2023, because I had received over £14,000 in untaxed interest on savings. The savings figure was supplied to HMRC by National Savings.

"Unfortunately, I have no such account or interest. It is fictional. I contacted the tax office, but now I have been told the Pay As You Earn tax code for my work pension is being changed, leaving me worse off by about £500 a month and cutting my pension by about a third."

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The tax expert replied: "I asked HMRC to look into this and they moved with commendable speed. Three days after I contacted them, you received a call from the tax office, apologising and offering £75 compensation, as well as issuing you with a new PAYE code. Instead of £2,751, you owe £1.80p.

"NS&I routinely tells the Revenue about large interest earned by savers, and tax staff then link the tip-off to the taxpayer's records. In a nutshell, someone really did get £14,750 interest – but HMRC linked this to you by mistake."

Replying to the story, a reader said: "l learned many years ago not to get involved with the taxman. I used to have a loan which was subject to a tax rebate but which had to be claimed. after making the claim the taxman wrote saying the claim was valid and my code altered according.

"A couple of weeks later I recieved another letter saying they'd gone through all of my tax affairs and found I'd been underpaying and they were reclaiming the back tax and I ended up paying more than I did before. the moral of the story is to let sleeping dogs lie."

"Mistakes like this (both for & against a taxpayer) are far too common. The system is ridiculously complicated & it's not surprising things go wrong. Successive Governments have avoided real reform & so the system costs huge amounts to administer & causes errors. Trying to get a resolution is tortuous!" a second said.