UNDERSTANDING SIMPLE ASSESSMENT AND SAVINGS INTEREST

ASESA Solutions Ltd - UNDERSTANDING SIMPLE ASSESSMENT AND SAVINGS INTEREST

INTRODUCTION

From October 2025, HMRC have started issuing Simple Assessment letters for tax owed on bank and building society interest earned between April 2024 and April 2025. This helps those who do not normally file a Self-Assessment to pay tax on savings interest easily.

HMRC receives interest information directly from banks and building societies, so in many cases they can calculate your tax automatically and issue a letter showing the total tax due.

HOW SIMPLE ASSESSMENT WORKS

Some may have already received a Simple Assessment letter for 2024–25 without including savings interest. If HMRC later receives additional interest information, a second Simple Assessment letter may be issued showing the total tax owed for the year, including any previously reported amounts. Hence, you should deduct any payments already made to calculate what remains due.

TAX-FREE INTEREST

You can earn some interest before paying tax because of:

• The Personal Allowance (£12,570 for 2024–25)

• The Personal Savings Allowance (up to £1,000 for basic-rate, £500 for higher-rate taxpayers)

  
  

WHY FIGURES MAY DIFFER

You may notice differences between bank statements, tax codes, and Simple Assessment letters. This happens because:

• Some interest may be tax-free under the Personal Savings Allowance (PSA), or because it comes from an ISA, which is always tax-free.

• Only taxable interest is reflected in your tax code. HMRC may also use estimates if they do not yet have complete information from banks.

• Your bank statement shows the total interest paid, including tax-free amounts, which is why it can appear higher than the taxable amounts in HMRC records.

  
  

HOW TAX IS COLLECTED

• Smaller amounts of taxable interest can be collected automatically through your tax code (PAYE), adjusted via wages or pensions.

• Larger amounts, or interest that cannot be included in your tax code, will appear in a Simple Assessment letter, which is to be paid directly to HMRC by the deadline.

Therefore, it’s normal for figures to differ across documents. Always refer to the Simple Assessment letter for the official amount owed.

NOT EVERYONE WILL RECEIVE A SIMPLE ASSESSMENT. HERE’S WHO TYPICALLY DOES:

• Only clients with simple tax affairs may receive a Simple Assessment.

• Those filing a Self-Assessment will declare all income themselves, so no separate Simple Assessment is needed.

• Complex cases or multiple income sources still require filing Self-Assessment as usual.