Tax on savings?

kittiwoz

I applying to do a PGCE in secondary maths starting next September. It seems there is quite a lot of financial support available: Maintenance grant up to £2,835, tax-free bursary of £9,000 (£225 per week), Student loan for maintenance (probably eligible for £3,580), and a student loan for finance to cover fees. I'm planning on staying with either my parents or grandma while I do the course so I shouldn't need anything near that about to live while I'm doing the course and I was thinking of putting a lot in high interest savings accounts or an ISA.

Since student finance doesn't count as income for taxation purposes and I don't expect to earn above the tax-free threshold does that mean I shouldn't pay tax on my interest and would therefore be better with a high interest account than an ISA? If so do I have to fill out a form or something so I don't get taxed?

tinkerbell84

Student finance doesn't count as income, but interest does

kittiwoz

I know but there is a tax free income allowance of about £6,000 and I won't earn that in interest! Even if I take some part time work I don't expect earnings from that plus the interest to exceed the threshold.

aberimp

I've had to do a similar thing myself, kittiwoz.

Students have to pay tax, with the same rules that apply to everybody else. However, the first £6,035 is tax-free (this figure excludes student finance).

Your bank account will have 20% tax taken off as standard. To avoid this being taken off, you have to send a form R85 to your bank (or give it to your nearest branch). The form is available for download and printing on the HMRC website. Or just type Form R85 into a search engine.

Hope this helps.

Fred_Bear_2

AFAIK bank interest is taken into account by SLC but ISA interest is ignored. This is one reason why ISAs are good for students.

Lokolo

To be quite honest, SLC didn't really notice about my savings (outside ISA) or income, didn't change what I got what so ever. But it was non income assessed.

Pomdren

I was just about to post a topic to this effect! Glad to know someone is also thinking the same thing as me!

I have some savings I was planning on putting in an account to get me some interest, but I don't know whether it's better to put it in an ISA (which definitely won't be taxed, but has a lower interest rate) or a normal savings account (which probably won't be taxed, and has the higher interest rate). Interest will no way exceed £6k, and any part-time income I get is unlikely to exceed the £6k either, so would it be the best idea to put it in a savings account, rather than an ISA?

Thank you for your help

Lokolo

Depends how long you want to keep the money in the savings.

If you want to keep it for longterm when you will have a job and be taxed then obviously an ISA will be good, because as soon as you start working it still won't be taxed, whereas a normal savings account you will be.

Pomdren

So as long as I don't leave it there indefinitely, it's a good idea? I was going to put it in there for the four years of my course, and then probably take it out.

Lokolo

Then a high interest account and an R85 form (tax free interest) is good enough.

Just make sure you tell the bank as soon as you start paying tax though otherwise it counts as tax evasion (!!!).

Pomdren

Sorry, had to go yesterday. Tell the bank? So the R85 says I don't pay tax, and they won't notice even if I go over the £6k? How will I know when I start paying tax?

Also: I've filled out an R85 to not get tax taken from my interest on my current bank account... will I need to fill out another one for my savings account (with a different company), or will one do for everything?