Incorrect savings interest data used by HM Revenue and Customs (HMRC) has led some taxpayers to overpay by large amounts, including one case involving an estimated £1,476 in excess tax. The issue has prompted calls for people with savings accounts, including ISAs, to review their tax codes.
Questions have also been raised about how savings information is collected and applied through the PAYE system, with advisers and industry figures warning that estimates may not always reflect actual account activity. HMRC has come under renewed scrutiny after reports emerged that some savers were incorrectly taxed because of errors linked to savings interest reporting.
According to reporting by The Telegraph and statements referenced by financial advisers, tax codes have in some cases been adjusted using incorrect estimates of untaxed savings income. The issue appears to have affected people holding both taxable savings and tax-free ISA products.
Savings Data Errors Led to Incorrect Tax Bills and Reduced Take-Home Pay
One reported case involved a worker whose HMRC records showed £3,847 in untaxed savings interest, despite the actual amount being £94. According to The Telegraph, the discrepancy resulted in an estimated tax overpayment of £1,476 during the 2025–26 tax year and reduced monthly pay by around £200.
Under current rules, banks and building societies submit annual returns to HMRC showing interest paid or credited to eligible customers. HMRC uses this information to pre-fill tax accounts, adjust PAYE tax codes, and cross-check self-assessment returns.
Savings interest held outside ISAs may be taxed if it exceeds the Personal Savings Allowance. Basic-rate taxpayers can earn up to £1,000 in savings interest before tax applies, while higher-rate taxpayers receive a £500 allowance and additional-rate taxpayers receive none. These thresholds have remained unchanged since their introduction in 2016.
Financial advisers have questioned how some estimates are produced. Robyn Lovatt of Shackleton said savings interest estimates are increasingly being inserted directly into PAYE codes “often without any clear breakdown of how the figures have been calculated.”
She also stated that the process relies on previous-year information, creating situations where taxpayers may be responding to estimates that no longer match current circumstances.
ISA Reporting Issues and Earlier Complaints Highlight Broader Concerns
The issue extends beyond individual cases. Online bank Zopa told The Telegraph that “hundreds” of customers may have had tax code changes after tax-free cash ISA interest was incorrectly reported.
Zopa said the reporting issue was identified on October 7 last year and corrected information was sent to HMRC the same day. The bank later learned from customers that some had received unexpected tax demands or revised tax codes despite the correction.
Historical concerns have also surfaced. The Parliamentary and Health Service Ombudsman previously reviewed a complaint involving savings interest calculations dating back several years. Savings figures had been duplicated and, in some instances, repeated multiple times after account records were incorrectly restored.
HMRC said it updates tax codes using “the most recent data available from financial institutions” and stated that it continuously improves its processes to correct payments. The authority added that anyone who believes their information is incorrect should contact HMRC so adjustments can be made.
