Introduction: Third-Party Data Will Match Your Bank Interest to You
Third-party data from British banks changes on 6 April 2028, when interest reporting moves from one annual file to four quarterly files tied to your National Insurance number. HMRC published the outcome of its technical consultation on 29 October 2026, and final regulations are due on 3 November. For most savers, this means a tidier tax code. For an American who stopped filing UK returns, however, it removes the mismatch that may have kept a problem quiet for years.
The commentary we read addresses banks, payroll teams or ordinary savers. None of it asks what happens when the saver also files a US return. That gap matters, because the new third-party data can move tax into your payslip, split a joint account differently from your US return and ask you to sign a declaration about your eligibility. At TaxYork, we prepare both countries' returns for wealthy Americans, so this guide works through each of those collisions and what to fix before the first file goes in.
Third-Party Data in One Paragraph
The third-party data regime is a standing duty on banks, building societies and other financial institutions to send HMRC customer-level interest figures without waiting for a notice. Current and savings account interest goes quarterly, while other interest goes annually. Each record carries your name, date of birth, address and, wherever possible, your National Insurance number. Meanwhile, card acquirers report merchant sales monthly under the same framework, which matters if you own a retail or hospitality business.
Who Should Read This Guide
We wrote this for US citizens and green card holders living in Britain with substantial cash at UK banks. It applies with particular force if you have missed UK tax returns, if you opened accounts before you held a National Insurance number, or if you own savings jointly with a non-American spouse. Americans who have moved back to the United States and left money here also feature in third-party data, so read the section on former residents.
What the Schedule 23 Rules Require From April 2028
The legal power sits in Schedule 23 to the Finance Act 2026, which lets the Treasury require data on an ongoing basis. The detail sits in the draft Data-gathering (Ongoing Data) Regulations 2026. Treat every regulation number on third-party data below as draft until the final text appears, because HMRC has already said it changed parts of it.
The Quarters and the Deadline
The draft fixes four quarters: 6 April to 5 July, 6 July to 5 October, 6 October to 5 January, and 6 January to 5 April. Institutions first faced a 14-day deadline after each period. HMRC's outcome statement now refers to a 21-day deadline instead. On that basis, the first quarterly file for 6 April to 5 July 2028 would reach HMRC by about 26 July 2028. Compare that with today, when ICAEW's response notes a deadline of generally 30 June after the tax year ends. Consequently, HMRC could see some of your interest almost a year sooner than it does now.
What Each Record Contains
For third-party data on current and savings accounts, Schedule 2 to the draft asks for interest in the quarter, the cumulative total for the tax year and the currency if not sterling. It also covers account type, number, sort code and name, along with how many people hold the account. For individuals, it adds date of birth, principal residential address and either a National Insurance number or confirmation that you are not entitled to one. Dollar accounts at UK banks are therefore visible, with the currency flagged.
Why the National Insurance Number Is the Real Change
The volume of third-party data was never the obstacle. HMRC's original consultation put the share of reported accounts containing a National Insurance number at around 37%, and said records with one match far better. The Treasury's interest in fixing that is measurable. The HMRC policy paper scores the measure at £30 million in 2028-29, £350 million in 2029-30 and £465 million in 2030-31. Better third-party data is thus a revenue measure as well as a service improvement.
Why Americans Are Exposed in Ways Other Savers Are Not
Three features of American life in Britain make this regime bite harder. They explain why third-party data deserves attention from people who already pay substantial tax through PAYE and assume nothing is outstanding.
Accounts Opened Before the Number Arrived
In our experience, this is the commonest pattern among senior Americans in London. You arrive on a visa, your employer needs a bank account in the first week, and you open one weeks before your National Insurance number comes through. The bank never asks again. Years later, that same relationship holds a seven-figure deposit, yet the record HMRC receives carries no reference it can match with confidence. Under the third-party data draft due diligence direction, the bank must now try to close that gap.
The Belief That PAYE Finishes the Job
Many Americans stop filing in Britain because an employer or colleague said PAYE handles everything. PAYE handles salary. It does not automatically handle interest over your allowance, and GOV.UK states that savings interest above £10,000 must go on a Self Assessment return. At additional rate income you also have no Personal Savings Allowance, so the first pound of interest is taxable. Consequently, a banker on £400,000 with £20,000 of unreported interest has a filing problem, not a rounding error.
HMRC Already Holds a US Flag on You
Your bank also reports you under FATCA, through HMRC, by the 31 May filing date. You may recall the FATCA letter from your UK bank that started that process. We make no claim about how HMRC cross-references these files internally. Even so, the practical point stands: the same institution will hold your US taxpayer number and your balance, and its third-party data will now carry your UK reference on a far shorter cycle.
The National Insurance Number Request: What to Say When Your Bank Writes
Expect a third-party data letter or an app message well before April 2028. The draft direction treats new and existing customers differently, and the answer you give needs thought, because you are making a statement that may later be read alongside your tax history.
New Accounts and the 45-Day Window
For a new account, the bank must either request your number or take a declaration that you do not hold one. If you are eligible but have no number yet, the draft allows you to open the account and gives you 45 days to obtain one. If you miss that window, the bank should consider closing the account. ICAEW has already warned that 45 days looks short for people in unusual circumstances, including non-residents.
Existing Accounts and the Two-Attempt Rule
For existing accounts, the standard is reasonable efforts. The draft expects outreach once a year during the first two years, and further attempts after that only when know-your-customer checks are refreshed. Earlier feedback recorded in the summary of responses put typical response rates for similar outreach at around 20%. Ignoring the letter is therefore possible, but we advise against it. The draft schema carries a reason code for a missing number, and "no response from customer" is hardly a flag you want on a large deposit.
When You Really Are Not Entitled
Some Americans here have no number and no route to one. The draft describes eligibility broadly as people over 16 who plan to work with a National Insurance liability, claim benefits, have applied for a student loan or pay voluntary Class 3 contributions. A non-working spouse living on family wealth may fall outside that, though a change in circumstances can alter the answer. Before you sign any declaration of ineligibility, check the position against the National Insurance number application rules. The bank will still report your interest with your name, date of birth and address, so third-party data does not disappear when the number does. In addition, the draft expects the bank to keep your position under review.
Debanking Risk Is Real but Manageable
The banking trade bodies have flagged this third-party data risk directly. The building societies' response raises unintended harm from account closures, and HMRC's stated safeguard is that firms face no penalty where they made reasonable efforts. American clients already know how nervous British banks can be about US persons. For that reason, do not leave the request until the last week. Answer early, keep a copy and record which number you supplied to which institution.
What Sits Outside the Feed, and Why Silence Proves Nothing
An American can misread third-party data in the other direction. A clean HMRC record will not mean your cross-border reporting is clean, because the draft leaves some assets out of the quarterly stream and the IRS applies a different map altogether.
The Schedule 3 Exclusions
Schedule 3 to the draft excludes certificates of deposit, deposits held by a branch outside the UK, investments under a plan governed by investment plan regulations, and dormant accounts until a repayment claim is settled. The plan exclusion appears aimed at ISAs, although the main banking body's response asked HMRC to confirm the treatment of tax-advantaged accounts. Dividends and wider investment income also stay outside phase one, although the government has said it will revisit them.
Exclusion From This Feed Is Not Exemption
A Jersey deposit outside this third-party data feed still sits within other exchange channels and within your UK return if you are taxable on it. More sharply, an ISA that HMRC ignores remains fully taxable in America. Its interest belongs on your US return, and the account belongs on your FinCEN FBAR and potentially on Form 8938. We see this regularly in UK pension and ISA reporting. Therefore, never treat an accurate HMRC prompt as evidence that your missed FBAR or US filing position is sound.
Former Residents With UK Accounts
Nothing in the draft third-party data schedules filters by tax residence. An American who returned to Texas and kept a London savings account, and who holds an old National Insurance number, may simply be reported with a US address. Under Article 11 of the US-UK treaty, interest beneficially owned by a US resident is generally taxable only in the United States. Consequently, any HMRC prompt should meet a treaty answer rather than a payment, and your bank's address record needs to be accurate before the regime starts.
Three US Return Collisions the New Data Creates
UK commentary treats better third-party data as the end of the story. For a US filer, it marks the start of a reconciliation problem, because HMRC's output does not translate into the numbers Form 1040 needs.
PAYE Coding and the Foreign Tax Credit Basket
Through third-party data, the government wants to enhance PAYE coding of interest, so more of the tax may come straight from your salary. On paper that is convenient. On a US return, it creates a trap, because your P60 and P800 tax calculation can bury tax on interest inside one PAYE figure. A hurried preparer then treats it all as tax on wages under Form 1116. However, Treasury Regulation 1.904-6 allocates foreign tax to the income it was charged on. You therefore need to separate the coded amount each year and apply the high-tax rules correctly, as we explain in our guide to foreign tax credit basket errors.
Tax Year Quarters Against the US Calendar Year
The third quarter runs from 6 October to 5 January, so it straddles two US years. Likewise, the fourth quarter sits entirely inside one US year but belongs to a different UK year. Banks credit interest monthly, quarterly or at maturity, and your US return follows the calendar year in dollars, using a defensible rate such as the IRS yearly average. Cumulative third-party data totals will not reconcile to your Schedule B without bank statements. Accordingly, keep statements for every UK account by calendar month, and do not build your US figures from a prepopulated UK return.
Joint Accounts With a Non-American Spouse
GOV.UK says HMRC splits joint-account interest equally unless you ask for a different split, and the draft direction requires a number for every reportable individual. Unequal beneficial ownership needs a declaration, as our Form 17 guide sets out. On the US side, IRS Publication 550 looks to local law for each joint owner's share. Yet the FBAR requires you to report the full account value, as covered in our note on joint accounts and a non-US spouse. Once third-party data gives HMRC both spouses' numbers, a split that differs between countries needs a documented reason.
Worked Case Study: A London Executive With Five Unfiled Years
This illustrative case shows the numbers on a pattern we see often. The figures are our own, the exchange rate is a simplifying $1.30 throughout, and we ignore late payment interest to keep the arithmetic visible.
The Facts
Daniel is a US citizen and managing director in London, paid £420,000 through PAYE. He filed UK returns until 2020-21, then stopped after being told PAYE covered him. He and his British spouse hold a large joint deposit, opened before he had a National Insurance number, so third-party data on it has never matched cleanly. His half of the interest was £3,000, £9,000, £21,000, £24,000 and £22,000 across 2021-22 to 2025-26, totalling £79,000. He reported it on Schedule B each year and paid US tax on it, because no UK tax existed to credit.
The UK Bill and the Prompted Penalty Gap
At 45% with no savings allowance, Daniel owes £35,550 of UK tax. Failure-to-notify penalties turn on behaviour and on whether HMRC prompted the disclosure. HMRC's compliance manual illustrates a late unprompted, non-deliberate disclosure at 10%, while the published range places the prompted floor at 20% and the maximum at 30%. That gives £3,555 if Daniel moves first, against at least £7,110 if an HMRC letter arrives before he does. The ceiling is £10,665. Moving first saves at least £3,555 on these facts, and it also strengthens the non-deliberate argument itself.
The US Refund Most UK Calculations Miss
Daniel's interest totals about $102,700, on which he paid roughly $38,000 of US tax at 37%. His UK tax is about $46,215, which exceeds the US rate and so moves under the high-tax rules. Assuming accrual-method credits and enough general limitation, amended returns can release most of that $38,000. Section 6511(d)(3) gives a ten-year window for credit claims, which Form 1040-X delivers. Net of the refund, the real cost of Daniel's lapse is therefore the penalty and interest, plus any exchange rate drift. His 3.8% net investment income tax on Form 8960 stays where it is.
The Year the Coding Starts
Now move to 2028-29. Daniel has reduced his deposit, his interest is £10,000, and HMRC collects the tax through his code at 49%. That is £4,900 of tax inside his PAYE figure, or about $6,370. If his preparer treats it as wage tax, his $13,000 of interest stays in the passive basket with no credit. That leaves about $4,810 of US tax payable every year, while the matching UK credit sits idle in a general basket that already has excess credits. One allocation on Form 1116 changes that result. This is the point at which a third-party data improvement in Britain becomes a real dollar cost in America.
Your Pre-2028 Action Sequence for Third-Party Data
We work through the following questions in order with clients, because each answer determines the next step. Treat it as a practical checklist rather than a theoretical exercise, and start with facts you can establish in an afternoon.
First: Map What HMRC Will See
Begin by listing every UK account you hold or jointly hold, with the interest for each of the last six tax years. Next, mark whether the bank holds your National Insurance number and whether the account is a current account, savings account, ISA, certificate of deposit or offshore branch deposit. Then compare the interest with what your UK returns declared. That single schedule shows whether third-party data will confirm your history or contradict it. Your Personal Tax Account can also show what HMRC currently estimates.
Second: Decide the Route for Past Years
If you never filed, you are likely dealing with failure to notify and missed UK tax returns. Do not assume a short lookback, because section 36 of the Taxes Management Act 1970 gives HMRC up to twenty years for a failure to notify unless you have a reasonable excuse, as well as for deliberate behaviour. Careless errors on a filed return carry six years, as our note on discovery assessments explains. If you did file but omitted interest, the question becomes correction of an inaccurate return. That second group should read our analysis of the customer correction notice. HMRC's policy paper dates that draft regime to 1 April 2028, days before the third-party data regime begins. Under the draft, leaving a known error uncorrected after a notice can turn it into deliberate behaviour.
Third: Sequence the American Side
Do not correct one country in isolation just because third-party data concerns only Britain. A UK disclosure generates foreign tax that should flow into amended US returns, and an unfiled US position needs its own remedy. For Americans who have also fallen behind in the United States, our IRS Streamlined Filing team can review whether the Streamlined Foreign Offshore Procedure fits your facts. Meanwhile, foreign accounts and missed FBAR filings run through our FBAR and FATCA team. Any factual statement in one country's filing must be consistent with the other, so agree the story once and on evidence.
Fourth: Prepare for 49%
From 6 April 2027 the Budget takes savings income tax to 24%, 44% and 49%, so the first quarterly files will show interest taxed well above today's 45%. Review your deposit structure with both tax systems in view before third-party data starts flowing, not after. Our cross-border tax planning work and treaty optimisation service can both feed that review.
How TaxYork Can Help With Third-Party Data Exposure
We prepare both countries' returns, so one team reconciles the third-party data HMRC will receive with what the IRS has already seen. Our work starts with a schedule of each UK account, its interest and its reporting status. We then prepare missed UK tax returns or the corresponding disclosure, amended Form 1040-X claims, Form 1116 basket allocations, FBAR and Form 8938 filings, and calendar-year interest reconciliations from your bank statements. Moreover, we can review how you respond to your bank's request before you send it, which is where many avoidable inconsistencies begin.
Conclusion: Use the Runway Before the First File
Better third-party data will not create new tax. It will simply make old omissions easier to see and new errors easier to generate. The third-party data regime starts on 6 April 2028, and the savings rate rises a year earlier, so the runway is long enough to act unprompted but not long enough to ignore. Ultimately, an American who settles the UK position now can often recover much of the cost through US credits. Waiting risks a higher penalty, a more awkward conversation with your bank and a payroll figure your US return misreads.
Contact Us
If you hold substantial cash in Britain and your UK filing history has gaps, book a consultation and we will map your accounts against both tax systems. You can also email hello@taxyork.com or call 020 3488 8606.
Disclaimer
This article provides general information for educational purposes only and does not constitute tax, legal or financial advice. The regulations described were in draft on the date of writing, final text is due on 3 November 2026, and the 2027 savings rates remain subject to Finance Bill 2026-27. The case study is illustrative. Please take personalised professional advice before acting.