How do you manage bank and building society interest under self-assessment?

Gathering together tax return information for the preparation of the annual tax return is a challenging task, as it involves keeping track of everything that needs to be declared and what does not.

One of the aspects that could come as a surprise is the need to pay tax on interest accrued from banks and building societies.

As not all interest is taxable, it is worth understanding when you are likely to face tax obligations and how to manage them effectively.

When is bank and building society interest taxable?

Helpfully, HMRC have taken to alerting people when the interest they are accumulating becomes taxable.

From October 2025, Simple Assessment letters have been dispatched that should feature a breakdown of the amount of tax owed on interest incurred between April 2024 and April 2025.

This letter seeks to provide clarity on how to pay your tax bill and should explain why you need to pay it.

There are times when HMRC may send out more than one letter and you should use the information provided in your most recent letter to determine the amount of tax owed.

This will be true even if you have already made a payment based on a previous letter, as there may still be outstanding tax to pay once calculations are refined.

Why do the figures not always match?

Sometimes the figures from your tax code and bank statement may not match what is shown in the Simple Assessment.

This might cause some alarm, but it is a standard part of the process.

The discrepancy between the figures can arise due to the myriad of factors that influence the tax bill shown on the Simple Assessment letter.

The main factor to keep in mind is that some interest on your personal savings allowance can be tax-free and this will not be incorporated in the tax bill you receive from HMRC, as only taxable interest is included in your tax codes when preparing assessments.

Additionally, HMRC may be using estimates that they will then rectify once they have a clearer picture of the actual amount owed.

This is why you may receive more than one Simple Assessment letter and why it is important to treat the latter one as more valid and respond accordingly.

If you do feel that there are any issues with how your tax bill has been calculated, then you should contact HMRC directly.

This must be done within 60 days of receiving the letter and you may lose your ability to challenge the bill if this time elapses.

Our team are on hand to help you understand your tax obligations.

If you receive a Simple Assessment letter or have any concerns about your self-assessment returns, then we can help you stay compliant while highlighting your rights and responsibilities.

For expert support with your personal tax, speak to our team today!