Do I Have to Notify HMRC of Savings Interest?

Understanding whether do i have to notify hmrc of savings interest? can help you avoid penalties, stay compliant with tax rules, and even save money. Many UK savers are unsure about how their interest earnings are taxed—or whether HMRC needs to be informed at all.

What Counts as Savings Interest?

Savings interest is money earned from accounts where you deposit your funds. These include:

• Regular savings accounts
• Fixed-rate bonds
• ISAs (although interest here is tax-free)
• Bank current accounts (with interest features)
• Credit union accounts

The amount of interest you earn depends on your balance and the account’s interest rate. Most banks will automatically deduct tax if required, but that’s not always the end of the story.

Is Savings Interest Taxed in the UK?

Yes, savings interest can be taxed—but there are allowances that protect much of your interest from tax.

Personal Savings Allowance (PSA)

The Personal Savings Allowance was introduced in 2016 and allows most people to earn interest tax-free, up to a certain amount:

• Basic-rate taxpayers (20%) can earn up to £1,000 of interest tax-free.
• Higher-rate taxpayers (40%) get a £500 allowance.
• Additional-rate taxpayers (45%) don’t get any allowance.

So, if you’re a basic-rate taxpayer earning £900 interest in a tax year, you don’t need to pay any tax—or notify HMRC.

Starting Rate for Savings

If your total income (excluding savings) is less than £17,570, you could benefit from the starting rate for savings, which can give you up to £5,000 of tax-free interest.

This is in addition to the Personal Savings Allowance. However, the more you earn from non-savings income, the less of the starting rate you get.

Do I Have to Notify HMRC of Savings Interest?

The answer depends on how much interest you earn and your total income. Let’s break it down.

You DON’T Need to Notify HMRC If:

• Your total savings interest is within your Personal Savings Allowance.
• You earn no more than £1,000 (basic rate) or £500 (higher rate) in interest.
• Your bank or building society reports the interest directly to HMRC through the automated system.

In many cases, HMRC already knows what you’ve earned thanks to reports from banks.

You DO Need to Notify HMRC If:

• Your savings interest exceeds your allowance.
• You’re an additional-rate taxpayer (no PSA).
• You earn foreign interest that isn’t automatically reported to HMRC.
• You submit a Self Assessment tax return, and interest must be declared as part of it.
• You receive interest from non-UK accounts (even if it’s tax-free abroad).
• You’re asked by HMRC to complete a tax return.

In these cases, you’ll need to inform HMRC to ensure you’re taxed correctly and avoid underpayment charges.

How Does HMRC Find Out About Your Savings Interest?

Since 2016, UK banks, building societies, and credit unions automatically report interest payments to HMRC. This data is used to update your tax code if necessary.

If HMRC believes you owe tax on your savings, they may adjust your PAYE tax code to collect it. Or, they may ask you to fill in a Self Assessment return.

This system generally works well for most people, but if you have multiple accounts, foreign interest, or complex tax affairs, you should check everything’s been captured correctly.

How to Report Savings Interest to HMRC

If you do need to report your savings interest, you can do so in one of the following ways:

1. Through a Self Assessment Tax Return

If you’re self-employed, a landlord, or have complex income sources, you probably file a Self Assessment return anyway. In that case:

• Include your interest income in the “Interest and Dividends” section.
• Declare both UK and foreign interest.
• Submit the return by 31 January after the end of the tax year.

2. Contacting HMRC Directly

If you don’t usually file a Self Assessment form but believe you owe tax, you can:

• Use your Personal Tax Account online to update savings interest.
• Or contact HMRC via phone or letter.

This is helpful if your interest just nudges over the threshold, and you don’t want to complete a full tax return.

3. Letting HMRC Adjust Your Tax Code

In some cases, HMRC may adjust your PAYE code to collect tax on interest automatically through your salary. This happens if:

• They get reports of interest over your allowance.
• They estimate future interest based on past returns.

Always double-check your tax code and statements for accuracy.

What If I Don’t Tell HMRC?

If you owe tax and don’t report your savings interest, you might:

• Be charged interest on unpaid tax
• Receive penalties for failing to notify
• Be subject to a tax investigation

Even if it’s accidental, failing to report taxable interest can lead to problems—so it’s always better to check and act early.

What About ISAs?

Individual Savings Accounts (ISAs) are a different story. You don’t have to tell HMRC about interest earned from:

• Cash ISAs
• Stocks & Shares ISAs
• Innovative Finance ISAs
• Lifetime ISAs

The interest in these accounts is completely tax-free, and it doesn’t count toward your Personal Savings Allowance.

Does This Apply to Children’s Accounts?

Interest earned in children’s savings accounts usually doesn’t need to be reported. However:

• If a parent gives money to a child and the interest earned is more than £100 per year, it’s taxed as the parent’s income.
• If the interest is under this limit, there’s nothing to report.

This rule doesn’t apply to gifts from grandparents or other relatives.

Read More: hmnews

FAQ

Conclusion

So, do I have to notify HMRC of savings interest? In many cases, the answer is no, especially if you stay within your tax-free allowance. However, if your interest earnings exceed your allowance, or if you have foreign accounts or complex finances, it’s your responsibility to report the interest and pay any tax due.

To stay safe, always:

• Check your total interest each year
• Understand your personal tax-free allowances
• Use your Personal Tax Account to keep HMRC updated
• File a Self Assessment return if necessary

When in doubt, contact HMRC or a tax advisor to avoid unexpected bills. Staying informed is the best way to stay in control of your savings.