Gov Green Light for Big Brother HMRC To Ask Banks About Your Cash Savings

We have been warning you for many years that the government (whether Labour or Tory) is gradually increasing the powers of ‘Big Brother’ HMRC to have access to you finances.  We have:

‘Making Tax Digital’  and Big Brother

• Property transactions via HM Land Registry have been accessible by HMRC for many years.
• Pensions and investments have been required to notify HMRC of taxable events for many years.
• Employers have been required to electronically file Payroll under MTD with monthly returns since 2013.
• Limited companies have been required to electronically file VAT quarterly returns via approved software since April 2019.
• April 2026 - Self Employed and Landlords with qualifying income over £50,000 will be required to file quarterly returns via approved software.
• April 2027 - Self Employed and Landlords with qualifying income over £30,000 will be required to file quarterly returns via approved software.
• April 2028 - Self Employed and Landlords with qualifying income over £20,000 will be required to file quarterly returns via approved software.
• There is no deadline, but Partnerships will also be required to file returns shortly.

Banks and Building Societies Sharing Your Information

• From April 2027, banks and building societies will be required to collect National Insurance Numbers for all existing and new savers. 
• This information will be passed to HMRC.
• This will mean HMRC will know who has earned interest on savings and will no doubt check on those that have completed self assessment returns to ensure interest income was included.
• HMRC will also no doubt check those NI numbers that have not filed returns to ensure tax is paid when due on cash savings interest.

Comment

We welcome the move, we should all pay our fair share of taxes and there will be many that do not disclose bank interest earned but sadly, there will also be those that did not realise they should be paying tax on interest earned.  Higher rate and additional rate taxpayers may get caught out if they miss that they earned a few £ in interest on a small, long forgotten or irregularly used accounts where interest income should have been declared and income taxes paid.

It is not all ‘doom and gloom’ though.  Many of us have tax free savings allowances in addition to Cash ISA allowances.

Income Position for Additional Tax-Free Interest

• Below £17,570 pa = Starting Savings Rate of 0% on 1^st £5,000 interest (within £17,570 income) plus Personal Savings Allowance of 0% tax on £1,000 interest.
• Basic Rate Taxpayer (20%) = Personal Savings Allowance of 0% tax on £1,000 interest.
• Higher Rate Taxpayer (40%) = Personal Savings Allowance of 0% tax on £500 interest.
• Additional Rate Taxpayer have no Personal Savings Allowance.