Why Have I Received a Letter from HMRC Saying I Owe Tax?
If you’ve recently received a letter from HMRC saying you owe tax, you’re not alone — and you’re not necessarily in trouble. HMRC has increased its use of data from banks and other institutions, which has led to more people receiving unexpected tax bills. One of the most common reasons in 2025? Tax due on interest earned from savings.
Why You Might Have Received a Tax Bill from HMRC
1. Tax on Interest from Savings Accounts
Many people are being caught out by tax on their savings interest. Here’s why:
Banks and building societies report your interest income directly to HMRC.
If your interest goes over your Personal Savings Allowance (£1,000 for basic rate taxpayers, £500 for higher rate), you may owe tax on the excess.
Even small amounts across multiple accounts can add up and push you over the allowance.
HMRC uses this information to issue tax calculations — often without any input from you.
Example: If you earn £1,500 in interest in a year and are a basic-rate taxpayer, you’ll owe tax on £500 of that.
2. Incorrect or Outdated Tax Code
If your tax code is wrong, you might underpay tax throughout the year without realising it. This often happens when:
You change jobs.
You receive benefits like a company car.
You have multiple sources of income.
HMRC will eventually identify the shortfall and issue a bill to collect the difference.
3. Untaxed Income Not Declared
You’re expected to pay tax on all income — not just what comes through PAYE. Common examples include:
Rental income
Freelance or side-hustle earnings
Dividends
Capital gains - If you haven’t declared this income, HMRC might have found it through third-party data and calculated a bill for the unpaid tax.
4. High-Income Child Benefit Charge (HICBC)
If you or your partner earn over £60,000 and received Child Benefit, HMRC may require some (or all) of it to be paid back via the HICBC. This is often missed by higher earners and can result in an unexpected tax demand.
5. Late or Incorrect Self-Assessment Return
If you submit your Self-Assessment late, or with errors, you could receive a revised tax bill that includes:
Penalties
Interest on late payments
Estimated figures if returns were missed
What You Should Do if You Receive a Tax Bill?
Don’t ignore it. The amount may increase due to interest or penalties.
Check the details. Look for any discrepancies in income, tax codes, or bank interest figures.
Compare with your records. Review your bank statements and tax returns.
Get professional advice. At Welf Accountants, we’ll explain the letter and act on your behalf with HMRC if needed.
How to Avoid Future Tax Surprises
Track all sources of income, including interest from all savings accounts.
Know your Personal Savings Allowance and monitor it yearly.
Review your tax code regularly, especially after life or job changes.
Keep accurate financial records and use accounting software if you’re self-employed.
Work with a qualified accountant to manage returns and avoid mistakes.
Need Help Understanding a Tax Letter from HMRC?
Tax letters from HMRC can be confusing and stressful — especially when they come out of the blue. But with expert support, you can resolve the issue quickly and avoid further penalties.
At Welf Accountants, we help clients:
Understand why they owe tax
Review and dispute incorrect charges
Declare previously unreported income
Stay compliant and tax-efficient going forward
👉 Book a free consultation or call us on 01926 671870.