An HMRC savings tax letter usually means HM Revenue & Customs believes you owe Income Tax on savings interest that was not fully collected through PAYE or Self Assessment. In 2026, many of these notices are being issued as Simple Assessment letters, officially called PA302, after HMRC receives income and interest information from banks, building societies and other sources.
Receiving one does not automatically mean the calculation is correct. You should check the interest figure, tax year, allowances and any payments already made before paying the amount requested.
Why HMRC Is Sending Savings Tax Letters in 2026
HMRC announced on 28 July 2026 that it expects to issue around 1.8 million Simple Assessment letters relating to the 2025 to 2026 tax year. Savings interest is specifically listed as one of the reasons people may receive these notices.
The timing is important. HMRC says working-age customers began receiving Simple Assessment letters from 30 June 2026, while letters to pensioners began from 12 August 2026. A further batch is scheduled between October and December 2026, specifically relating to Bank and Building Society Interest data.
This means someone who has heard nothing yet about savings interest earned during the 2025 to 2026 tax year could still receive a letter later in 2026.
Banks and building societies normally supply HMRC with information about interest paid to customers. HMRC combines that information with data from employers, pension providers and other sources to determine whether enough Income Tax has been paid.
What Is a PA302 Simple Assessment Letter?
A PA302 is an HMRC Simple Assessment tax calculation. It is used when HMRC has calculated that someone owes tax but the outstanding amount cannot appropriately be collected through their normal PAYE tax code.
The letter should show:
- the tax year concerned
- the income HMRC has included
- savings interest or other untaxed income
- allowances used in the calculation
- how much tax HMRC believes is outstanding
- when payment is due
- how to pay
A Simple Assessment is not the same as completing a Self Assessment tax return. HMRC calculates the liability using information it already holds.
HMRC says a Simple Assessment may be issued where there is untaxed savings interest or dividends, pension income, another source of untaxed income, or an Income Tax liability that cannot be collected through the person’s tax code. Larger liabilities, typically £3,000 or more, can also result in a Simple Assessment.
Why Savings Interest Can Create an Unexpected Tax Bill
Since April 2016, most bank and building society interest has been paid gross, meaning the bank generally does not deduct basic-rate Income Tax before paying the interest.
That does not mean the interest is automatically tax-free.
Instead, the amount of tax due depends on the saver’s total income and the tax-free allowances available to them. HMRC then uses information reported by financial institutions when checking whether tax is owed.
Higher savings rates in recent years have also made it easier to generate enough interest to exceed the Personal Savings Allowance. A person does not necessarily need an exceptionally large cash balance to create taxable interest.
How Much Savings Interest Can You Earn Tax-Free?
There are potentially three different provisions that can protect savings interest from Income Tax:
- unused Personal Allowance
- the starting rate for savings
- the Personal Savings Allowance
Exactly which ones apply depends on your other income.
Personal Savings Allowance
For the 2026 to 2027 tax year, the Personal Savings Allowance remains:
| Income Tax position | Personal Savings Allowance |
|---|---|
| Basic-rate taxpayer | £1,000 |
| Higher-rate taxpayer | £500 |
| Additional-rate taxpayer | £0 |
The same £1,000 and £500 allowances applied in 2025 to 2026.
You pay tax only on taxable savings interest that remains after the relevant allowances have been applied.
For example, a basic-rate taxpayer receiving £1,400 of taxable bank interest could normally have £1,000 covered by the Personal Savings Allowance, leaving £400 potentially taxable.
If that £400 falls entirely within the basic savings rate, the tax would generally be £80 at the current 20% rate.
Individual circumstances can produce a different result, particularly where savings income moves someone into another tax band.
Starting Rate for Savings
People with relatively low non-savings income may qualify for an additional 0% starting rate for savings of up to £5,000.
For 2026 to 2027, you normally cannot receive the starting rate for savings if your other income is £17,570 or more. If your other income is between the £12,570 Personal Allowance and £17,570, the £5,000 starting-rate band is gradually reduced.
For example, if someone earns £16,000 from employment, part of the £5,000 savings starting-rate band is lost because their employment income exceeds the £12,570 Personal Allowance.
The starting rate can be especially important for pensioners or people with limited earned income and substantial savings.
Unused Personal Allowance
The standard Personal Allowance for 2026 to 2027 is £12,570. If it has not already been used by salary, pension or other taxable income, some savings interest may fall within the unused portion.
The Personal Allowance is reduced where adjusted net income exceeds £100,000 and can eventually be lost completely.
What Savings Interest Does HMRC Tax?
The Personal Savings Allowance can apply to interest from a range of sources, including:
- bank accounts
- building society accounts
- credit union savings
- certain bonds
- peer-to-peer lending
- investment trusts and some other investments
- trust funds
- certain life insurance-related payments
HMRC provides the full categories in its official guidance.
The key distinction is between taxable savings outside tax-free wrappers and savings held in accounts where the income is specifically exempt.
ISA interest is normally tax-free
Interest earned inside an Individual Savings Account does not count towards your Personal Savings Allowance because ISA income is already tax-free. Certain National Savings and Investments products are also specifically exempt.
If an HMRC calculation appears to include ISA interest as ordinary taxable savings income, that is something worth checking carefully.
How HMRC Knows How Much Savings Interest You Earned
Banks and building societies report interest information to HMRC.
HMRC then uses this information when checking the tax position after the end of a tax year. Its Simple Assessment guidance confirms that calculations may use information from banks and building societies as well as employers and pension providers.
This reporting system explains why receiving a tax letter months after the tax year has ended is not unusual.
It can also explain why HMRC occasionally issues a revised calculation. For example, HMRC gives an official example where a taxpayer first receives a £300 Simple Assessment, then HMRC receives updated savings information and issues another assessment showing total tax of £450. If the taxpayer has already paid £300, only the £150 difference remains payable.
HMRC Savings Tax Letter vs P800
Not every HMRC savings-related tax calculation will be a PA302.
A P800 is another type of tax calculation sent when HMRC believes someone has paid too much or too little tax through PAYE. If a relatively small underpayment can be collected from wages or pension income, HMRC can normally adjust the person’s PAYE tax code.
For a P800 underpayment, HMRC says it will usually collect the amount through the tax code when the person pays tax through PAYE, has sufficient PAYE income and owes less than £3,000.
A Simple Assessment is more likely where HMRC cannot collect the tax conveniently through PAYE or other Simple Assessment conditions apply.
This distinction matters because the payment instructions and deadlines can differ.
What to Check Before Paying an HMRC Savings Tax Letter
Do not simply compare the final tax figure with your expectations. Check the information behind the calculation.
Start by checking your bank and building society statements, annual interest certificates and any account summaries covering the relevant tax year.
Look carefully at:
- the total interest HMRC says you received
- whether the correct tax year is shown
- whether interest appears twice
- whether a closed account has been included incorrectly
- whether tax-free ISA interest appears to have been treated as taxable
- whether the correct Personal Savings Allowance was applied
- whether the starting rate for savings should apply
- whether your income and tax band are correct
- whether you have already paid any part of the liability
Joint accounts can also affect the calculation. HMRC’s general rule is that interest on a joint account is split equally between the account holders, although HMRC can be contacted if that does not reflect the correct position.
What If the HMRC Savings Interest Figure Is Wrong?
A Simple Assessment should not be paid unquestioningly if the underlying figures are incorrect.
HMRC says taxpayers who believe information in their Simple Assessment is wrong must contact HMRC within 60 days.
Gather evidence before contacting HMRC. Relevant records may include annual bank interest statements, account statements, evidence showing that an account is an ISA, or records showing that the interest belongs to another tax year.
If HMRC receives corrected information from a bank or other source, it can issue an updated assessment.
When Does an HMRC Savings Tax Bill Have to Be Paid?
For a Simple Assessment covering 6 April 2025 to 5 April 2026, the deadline depends on when the letter is issued.
According to current HMRC guidance:
| When the Simple Assessment is received | Payment deadline |
|---|---|
| Before 31 October 2026 | 31 January 2027 |
| On or after 31 October 2026 | Within 3 months of the date of the letter |
Always follow the deadline printed on the actual assessment, particularly if your circumstances or tax year differ.
HMRC allows the amount to be paid in full or through smaller payments before the deadline, provided the entire liability is cleared in time.
A Simple Assessment contains a 14-character payment reference beginning with X. HMRC warns that using an incorrect reference can delay the payment or cause it to be allocated against another tax liability.
Do You Have to Complete Self Assessment Because of Savings Interest?
Not necessarily.
For employees and pensioners, HMRC can often deal with tax on savings through a PAYE tax-code adjustment or an end-of-year tax calculation.
HMRC states that people who already complete Self Assessment should report savings interest on their tax return. It also says registration for Self Assessment is required where income from savings and investments is more than £10,000, subject to the wider Self Assessment rules.
Someone receiving a PA302 Simple Assessment does not automatically need to file a Self Assessment return simply because the PA302 has arrived.
Can HMRC Change Your Tax Code Because of Savings Interest?
Yes.
For an employee or someone receiving a taxable pension, HMRC can change the PAYE tax code to collect tax due on savings interest. HMRC may estimate current-year interest using the amount reported for the previous year.
This can create confusion when interest rates, savings balances or accounts have changed substantially.
For example, someone who earned unusually high interest last year after holding cash temporarily may find that HMRC assumes a similar amount for the new tax year. Checking the estimated savings figure in a tax-code calculation can therefore be worthwhile.
Savings Tax Rates in 2026 and the Planned 2027 Increase
For the 2026 to 2027 tax year, taxable savings income is currently charged at:
| Savings tax band | 2026 to 2027 rate |
|---|---|
| Basic savings rate | 20% |
| Higher savings rate | 40% |
| Additional savings rate | 45% |
The government has already announced higher savings income rates from 6 April 2027. The planned rates for 2027 to 2028 are:
- 22% basic savings rate
- 42% higher savings rate
- 47% additional savings rate
These increases do not apply to a 2025 to 2026 savings tax letter and do not apply during the current 2026 to 2027 tax year. They are scheduled to take effect from April 2027.
That date distinction is important because reports about higher future savings tax rates can otherwise make an existing HMRC calculation look confusing.
What If You Received No HMRC Letter Despite Exceeding Your Savings Allowance?
Do not assume that silence means no tax is due.
HMRC says that employees and pensioners who exceed their savings allowance and have not received a tax calculation letter by 31 March following the relevant tax year should contact HMRC.
People who are not employed, do not receive a pension and do not complete Self Assessment may instead be contacted after their bank or building society reports their interest.
The correct reporting route depends on the person’s overall tax circumstances.
How to Check Whether an HMRC Savings Tax Letter Is Genuine
HMRC tax letters can be genuine, but fraudsters also imitate government correspondence.
A genuine Simple Assessment can arrive by post or appear within the taxpayer’s Personal Tax Account. HMRC specifically directs taxpayers to its online guidance for checking whether correspondence is genuine.
Rather than using unexpected links or payment instructions from an email or text, independently access GOV.UK or your HMRC account.
HMRC also publishes updated lists of genuine campaigns and correspondence. Its guidance warns against opening suspicious attachments or following links in unexpected messages.
If you are uncertain about a letter, verify it through HMRC’s official contact information rather than calling an unfamiliar number found elsewhere online.
How to Reduce Future Tax on Savings Legally
Receiving an HMRC savings tax letter does not mean the saver has done anything wrong. It often simply means taxable interest exceeded the available allowances.
Future exposure can sometimes be reduced through legitimate tax-free savings arrangements.
An ISA is the clearest example. Interest generated inside an ISA is generally tax-free and does not use up the Personal Savings Allowance. The overall ISA subscription limit remains £20,000 for 2026 to 2027.
The right approach depends on interest rates, access requirements, investment risk, existing ISA subscriptions and personal tax circumstances. Tax rules can also change, so decisions should be based on the rules applying to the relevant tax year rather than an old article or previous HMRC calculation.
FAQ
Why have I received an HMRC savings tax letter?
HMRC probably believes you received taxable savings interest that was not fully covered by your Personal Savings Allowance, starting rate for savings, unused Personal Allowance or tax already collected. HMRC can calculate this using information supplied by banks and building societies.
Is an HMRC savings tax letter the same as a Simple Assessment?
It can be. Many savings-related bills being issued in 2026 are PA302 Simple Assessment notices, but HMRC can also deal with savings-related underpayments through a P800 calculation or a PAYE tax-code adjustment.
How much savings interest is tax-free in 2026?
For 2026 to 2027, a basic-rate taxpayer can normally receive up to £1,000 under the Personal Savings Allowance, while a higher-rate taxpayer can receive £500. Additional-rate taxpayers receive no Personal Savings Allowance. Some low-income savers can also qualify for up to £5,000 under the starting rate for savings.
Do I need to tell HMRC about bank interest myself?
Banks and building societies normally report savings interest to HMRC. However, taxpayers remain responsible for ensuring their tax affairs are correct, and those completing Self Assessment must include relevant savings interest on their return.
What should I do if HMRC’s savings interest amount is incorrect?
Compare the figure with statements or annual interest certificates from your financial institutions. For a Simple Assessment, HMRC says you should contact it within 60 days if you believe information used in the calculation is wrong.
When is the 2025 to 2026 HMRC savings tax bill due?
For a Simple Assessment received before 31 October 2026 relating to 2025 to 2026, payment is normally due by 31 January 2027. If the assessment arrives on or after 31 October 2026, HMRC says payment is normally due within three months of the date of the letter.
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