HMRC asking banks to tell them how much people have in savings | Personal Finance | Finance

HMRC plans to look directly at people’s bank accounts to check whether interest should be charged on savings. Under the new rules, banks such as HSBC, Barclays, Lloyds, NatWest, Santander and Chase will be told to provide information such as National Insurance numbers.

One Article for Telegraph Jonathan Athow, HMRC’s strategy and policy director, said the aim was to make sure tax authorities had all the data they needed. He wrote: “HMRC is asking financial institutions to provide additional identifiers such as National Insurance numbers. We also want to modernize the way data is sent and improve timeliness.”

“These changes will improve matching rates and reduce the already small number of mismatches. The second change will improve the way HMRC communicates with taxpayers about savings income. This means more information is included in the tax calculations we provide to taxpayers. In particular, more detailed information about the interest received and details of how this data is used to calculate tax.

“The aim is to give taxpayers greater confidence in the system and make it easier for them to check and understand their tax situation. This reveals the different accounts and relevant interest amounts so people can see the information we use to calculate their taxes. We are currently working on plans for how best to integrate this additional data into the communications we share with taxpayers. The image below shows a model of the additional information HMRC plans to include in the future.”

He said the rise in interest rates had led to ‘higher levels of savings income by households and therefore higher amounts of taxable interest’. This made the system for determining and collecting interest tax more important.”

Mr Athow said the majority of people did not pay interest on savings. Basic rate taxpayers (20%) can earn up to £1,000 of interest tax-free through the Personal Savings Allowance. Higher rate taxpayers can earn interest at 40%, up to £500 tax free.

Additional rate taxpayers (45%) do not receive tax-free allowances. Mr Athow said: “Isas allow interest to be received completely tax-free. Even where interest is taxable, the personal savings allowance significantly reduces the number of people paying tax on their savings.”

“In total, only around one in six people earning taxable savings income have to pay any tax on it. HMRC does not rely on taxpayers to report savings interest for those that are not subject to self-assessment. Instead, it obtains information directly from banks and building societies using established statutory powers.”

He said that every year financial institutions provide HMRC with information about interest-bearing accounts, including the amount of interest paid and details of the account holder. Each year HMRC receives and analyzes over 100 million records of interest paid from around 300 financial institutions; but he said the changes were made to ensure the data was even more accurate for tax reasons.

HMRC collected an extra £13 million from taxpayers after threatening to raid bank accounts, it has been revealed. HMRC has been given so-called “direct collection” powers from the Labor government and can seize cash from people owed under £1,000.

The powers were approved by Labor Chancellor Rachel Reeves last year. After the rules were reinstated for tax department officials, HMRC used them 12 times, claiming a total of £225,000; This works out to £18,750 per borrower.

HMRC managed to collect £13 million between September and the beginning of May last year after issuing a public warning about the powers.

Under HMRC rules, tax officials can break into bank accounts to seize cash but they must ensure people are left with £5,000.

This will allow those affected to still pay necessary bills, leaving them with a cap to stay afloat amidst the Cost of Living.

Nimesh Shah, managing director at accountancy firm Blick Rothenberg, said: “I am not convinced that this is a sensible tool for HMRC to use, particularly at a time when businesses and individuals are struggling with the increasing tax burden as a direct result of government tax changes, so it seems like a double whammy.”

An HMRC spokesman said: “Most people pay tax on time and in full, but it is right that we try to collect tax from the small minority of people who can afford to pay but refuse to pay.

“More than £13 million has already been paid or included in payment schemes for public services due to the chilling effect of this measure.”