Taxed on £14,000 savings interest that wasn’t mine
P.T writes: 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.
ONCE the tax juggernaut starts rolling, it is very hard to apply the brakes. Your first inkling that anything was wrong came when you received a demand for £2,751, which was said to be tax due on interest of £14,750. All the taxman could tell you was that the figure had been supplied by National Savings, but officials there were no help either, as you could not give them the account number of the account you did not have in the first place.
You wrote to National Savings & Investments (NS&I) and received a written reply saying there was no account in your name. But, by then, the tax office had changed tack and decided to collect an extra £500 a month from your pension.
Staff assured you that you would not lose out in the long run if the tip-off from NS&I turned out to be wrong. But this is little comfort when you are losing such a huge slice of your pension for no reason.
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.