Banks fail tax knowledge test

Many of Britain’s biggest banks and building societies have shown a woeful lack of up to date knowledge about tax on savings, with two of the largest providers only scoring half the available marks in our tests.

From next April, 95% of savers will no longer have to pay tax on their savings, but until then millions of customers will either have basic-rate tax automatically deducted from their interest, or have to pay more through tax returns.

We mystery shopped 12 of the biggest savings account providers by calling each of them 12 times over two months and asking a number of questions about tax on savings. Worryingly, Barclays and NatWest, which together hold 29% of taxable cash savings deposits, scored just 50% and 52% respectively in our tests.

The questions asked, and key results from the providers were:

  • Is tax deducted? – A simple ‘yes’ would score a point, but one in 10 call handlers answered incorrectly. A Barclays agent suggested that anyone on a pension wouldn’t be taxed and one HSBC agent put our researcher on hold twice in order to try and find the answer, before saying that no tax would be taken.
  • How much is deducted? – All we wanted to hear was that 20% tax was automatically deducted from the interest, and yet 42% failed on this simple question. The worst scores came from Barclays and TSB, who only managed two correct answers out of a possible 12.
  • If you don’t pay tax, what can you do?– We wanted to be told about the R85, the form you can submit to a bank to stop tax being deducted. No providers scored 100% on this question, but Halifax, Yorkshire Building Society and First Direct managed 11 out of 12. At the other end of the scale, HSBC scored just half marks. A Santander call handler told us this happens automatically if the bank has your NI number and a Co-op Bank agent told us that you should ask your local council about this issue.
  • What can you do if you’ve paid tax you shouldn’t have? We wanted to be told about the R40 form, which can be completed and sent to HMRC to reclaim overpaid tax. The banks and building societies we tested only managed to score around a third of points on offer for this question, with NatWest scoring just one point. One Barclays agent incorrectly stated that the bank would rebate tax from the day you became a non-taxpayer, while another said ‘every penny’ of tax would be refunded after you register for gross interest.

As part of the same study, we also briefly looked at consumer knowledge and found that four in 10 savers earning less than £15,600 didn’t know that they may not have to pay tax on their savings.  We also found that two thirds haven’t registered for gross interest with their savings provider.

Which? Money editor Gareth Shaw, said:

“It’s worrying to see that so many banks are failing to get the basics right on how tax is deducted from your savings. It’s vital that staff are able to explain how these simple products work. The risk of giving out such incorrect advice is that customers could be hit in the pocket.”

Notes to editors:

  1. We selected 12 of the biggest savings account providers and called each of them 12 times in May and June 2015. This was to ensure that our scores reflected the overall performance of bank staff, not just one-off examples of good or poor practice. Our researchers said they were calling on behalf of a relative, and that they had some general questions about savings and tax.
  2. For the consumer knowledgesurveyWe asked 136 people with a total income, including interest on savings, of under £15,600 if they knew that they may be entitled to register to receive interest without tax deducted.
  3. Barclays and NatWest 29% figure was calculated by Mintel.
  4. Full table of results:

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