Savings and tax question

sloughflint

You just wanted an idea, Daisy.
Let's say your gross savings interest was £4000....
That would give you an income of £8500.

Now I'm very unsure of myself with the 10% bit and someone can correct if need be.
Personal allowance £6035.
Next £2230 taxed at 10%
remainder at 20%.
Tax due would be (8500-6035-2230)*0.2+(2230*0.1)=£270
Your gross savings would have been taxed at 20% 4000*0.2=£800
So with this example you would have overpaid by 800-270= £530

Do people agree on the 10% bit? Even though savings take into the 20% bracket? Or does 10% not apply here?

jem16

sloughflint wrote: »

Do people agree on the 10% bit? Even though savings take into the 20% bracket? Or does 10% not apply here?

My understanding is that the 10% part will apply to savings in this case. Basically your earned income has to exceed £6035 + £2230 for you not to be able to use the 10% band on savings interest.

So your calculations were spot on.

oldfella

10% applies as long as your earned income does not exceed 6035 up to a total taxable level of 8265. Earned income over 6035 up to 8265 is taxed at 20%. Any earned income over 6035 reduces the savings that can be taxed at 10%.

zzzLazyDaisy

Oh, thank you so much, i just wanted an idea of whether it was worth sending in the form. Seems it probably is!

Many thanks

Daisy

sloughflint

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.

Not allowed I don't think. I believe you can only sign an R85 if you know you won't be paying tax.

sloughflint

dooofeh wrote: »

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.

You will need to look carefully at your figures but with the example you've given, you should not be paying tax and therefore be filling out an R85 form.
Gross interest of £ 6000 is below your allowance of £6035....but only just so check carefully with your precise amounts and interest rate.

If you find that your expected interest before 05/04/09 will be just over, I would suggest you plan ahead and play around with the figures now ( 7 months left) and put some of the cash into an ISA and also purchase an index linked certificate to ensure the interest doesn't go above £6035.

When you've done that, you can fill out an R85 form which is much easier than having to claim back money each year with an R40 form.

http://www.nsandi.com/products/ilsc/index.jsp