Savings and tax question

dooofeh

Im 16 years old and i know little about this which is why im asking here.
I understand that i'm currently allowed £5435 of non-taxed income. What i was wondering is say i invest £100,000 in a 6% gross account.
Will i get the £5435 a year not taxed thn the remaining £565 taxed at 20% OR

will the 6% be all taxed staright away at 20% leaving me with 4.8% net a year. Sorry if my wording is a bit difficult but i know so little.

Lokolo

You will have the whole amount taxed. But then you can get a refund on the first £5435 so you will get £65 back.

Or, you can fill in an R85 form with the bank and have no interest taxed, then you have to pay the taxman some money.

Also, tax codes will be changing to 6 something in September, so you can earn more without being taxed.

^^^ ignore

dooofeh

Ok so for the first of your replies... where does that £65 back get calculated from?

and for the second... is this r85 form my best bet? how much would i have to pay?

Lokolo

£65.

The £5435 (tax free amount) which is taxed will go from £326.10 gross, going down to £260.88 after tax. £326 - 261 = £65, which is how much you would lose from tax when you don't have to.

^^^ ignore

The R85 form is okish bet. Not sure what others on the board would think.

dooofeh

So basically if i earn 6000 interest off the 100,000 per year, the whole lot will get taxed 20% leaving me with 4,800 interest. But then i could reclaim 1087 (20% of 5435)?

Lokolo

LOL Ignore my calculations I was going wild and not thinking. :cool::cool: Just woke up

Ok so you get £6000 interest gross.

£5435 of that is tax free. Making £565 available for tax. 20% of that is £113.

So you will have to pay £113 tax.

dooofeh

brilliant.... thankyou

Paul_Herring

Lokolo wrote: »

LOL Ignore my calculations I was going wild and not thinking. :cool::cool: Just woke up

Ok so you get £6000 interest gross.

£5435 of that is tax free. Making £565 available for tax. 20% of that is £113.

So you will have to pay £113 tax.

If this is the only income, then the tax rate will be 10%, not 20%. http://news.bbc.co.uk/1/hi/programmes/working_lunch/7191628.stm - search for 'Tax repayment'

Primrose

Just make sure that you take advantage of your annual £3600 tax free allowance in Cash ISAs, as I think that once you're 16 you can have an ISA. I know it's only a small proportion of your £100,000 but over a number of years it will build up and if you don't take advantage of each year's allowance you will lose it for ever.

jem16

Lokolo wrote: »

Or, you can fill in an R85 form with the bank and have no interest taxed, then you have to pay the taxman some money.

You can only fill in an R85 form if you can declare you are a non-taxpayer. That is not true in this case so no R85 can be submitted.

You must pay the tax and reclaim.

zzzLazyDaisy

I am in a similar postion.

I earn £4500 per year. My savings interest takes me over my personal allowance and also over the 10% band.

I have the form for reclaiming the overpaid interest, but I'm not that great at maths. TBH if the over paid tax on a full unclaimed personal allowance is £65, then frankly it doesn't seem worth the hassle for me to claim the tax on the small differential.

If some kind soul could do the calculation and give me an idea what the actual rebate is liekly to be, I'd be really grateful!

Many thanks

Daisy