Taxation
The question
To ask the Chancellor of the Exchequer, whether HMRC plans to take steps to change the (a) taxation of interest on savings and (b) tax system; and what assessment she has made of the potential impact of the tax system on people who pay both (i) PAYE and (ii) tax on savings interest.
Answered by Emma Reynolds
HMRC receives information from banks and building societies about the savings and investment income they have paid to their customers. Where possible, HMRC will match this information to a taxpayer’s record, and calculate any Income Tax due. If necessary, they will adjust the taxpayer’s tax code and send them an adjusted tax code notice. Guidance on Gov.uk sets out HMRC’s process to collect tax where an individual exceeds their allowance, settled either through Self-Assessment or adjustments to their tax code for Pay As You Earn customers.
A combination of several allowances means that around 85% of people with savings income pay no tax on their savings income.
Requiring banks and building societies to return to the system of deducting basic rate tax from interest would result in millions of savers being overcharged tax and needing to reclaim it from HMRC to benefit from their savings allowances.
The Government keeps all aspects of savings and tax policy under review
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