£300 million owed to Savers!

isasmurf

I was surprised to learn today (or yesterday as its now after midnight!) that the Inland Revenue have launched their latest TaxBack campaign this week.  This usually receives a lot of publicity but I have seen nothing this time around, although that might be because their press release (see below) seems to concentrate more on a recent project targeted at pensioners rather than the general tax back message.

TaxBack is a campaign the Revenue run every so often highlighting the fact that some people pay tax on savings when they shouldn't be.

The press release issued by the Revenue on Monday said

THE INLAND REVENUE ASKS: COULD YOU CLAIM TAX BACK ON YOUR SAVINGS?

Up to 4 million savers stand to gain from a new Inland Revenue initiative to encourage people to claim tax back on their savings. Already, over the past few months thousands of pensioners on low incomes have heard from the Inland Revenue wanting to give them back tax they have paid on their savings. Over £7.3 million tax has been repaid to more than 21,000 pensioners.

Now the Taxback campaign will encourage all savers on low incomes to check if they are eligible to claim back tax that has been automatically taken off their bank and building society interest before they receive it.

Dawn Primarolo, the Paymaster General, said:

'I am delighted that the Inland Revenue has been writing to pensioners and that so many have claimed back what is due to them. I'm pleased to support their efforts to make sure that everyone who might be able to claim back tax hears about it and knows what to do. Up to £300 million could be waiting to be claimed so it is vital that anyone who thinks they might be eligible contacts the Inland Revenue to find out more.'

They seem to have launched a website to go with the campaign at http://www.claimyourtaxback.com/

So have a look at the website and if you think that they have money belonging to you CLAIM IT BACK, don't let Gordon get his hands on it!

Milarky

It's not the 'fault' of the Inland Revenue that so many people might be owed tax, but the problem isn't helped by the 10% tax band concept either.

If you are a pensioner and have income from savings as well as pension sources then you need to register all your accounts for tax [at 20%] once your total income is above the personal allowance. But unless your pension-only sources of income are even higher than that allowance plus the 10% tax band then you will be overpaying savings tax [by 10%] for each pound of savings interest up to the top of the 10% band. [In other words there is no way of avoiding an overpayment.]

Had the 10% band been left as the 20% band [remember that one?]  then at least the problem would be partly resolved - because then the savings tax rate would again match the rate of tax due on those additional ££s. The only people still affected by overpayments would be those whose pension-only sources of income were below the personal allowance itself [a smaller group of people in other words]

Of course the lower rate band is a gimmick whether at 10% or 20%. It would not take any wit at all to consolidate the value [of the lower rate] into the basic allowance as follows:

rebate value = [22%-10%] times £2020 = £242.4

required increase = £242.40 / 22% = £1101

So if all personal allowances were just raised by £1100, or so, you would either pay tax at 0% or 22%

However this still leaves people whose income, ex savings, is under this new [higher] allowance, but whose savings interest exceeds the gap. They have to register accounts where they are 1p 'above' this gap, as it were, but don't have to do so if they are 1p 'below' the same gap.

The only 'solution' I can think of is that if interest wasn't paid by the bank [etc] directly into your accounts but, instead, had to be paid to the 'holder of the P45' [there always will be one if you think about it] then that body could simply add that payment to your receipts from them but tax the receipt on the correct [cumulative] basis. I would then suggest that they might be able to recredit the payment back to source [eg bank] which can [because it knows the value of the original credit] then show 'gross interest' and 'PAYE tax' accurately.

[This is plainly the product of a deluded mind on a grey bank holiday afternoon - ::) ]