Tax allowance confusion.

evenasus

I’m really confused about tax allowances.
I retired from work in 2001.
I’m 63 years young (16 in my head) and receive a state pension of £5116.32 pa.

Income last year from savings after standard 20% rate was deducted by building society was £9700.00
Income last year from tax-exempt ISA savings £2322.00.

My question is am I paying the right amount of tax?
Should I have paid the 20% on the taxable savings?
Or does the £0-£2230 10% apply to my taxable interest?

ceeforcat

Based on the figures you quote the tax on your savings should be:

Total saving interest £12125 (before tax)

£109 at 0% (balance of personal allowances)
£2230 at 10%
£9786 @ 20%.

I calculate that you are owed £244.80.

Because you are a taxpayer by virtue of your savings you will continue to make a claim each year as the first £2230 will continue to be taxable at 10% and you will have 20% deducted at source. When you turn 65, you will receive additional allowances and the repayment could top £500 per annum.

evenasus

Thank you CEEFORCAT for that information.
My husband believed all income from savings was taxable.
Just wait till he gets home tonight.
I should be able to claim back tax for the last five years then should I?

ceeforcat

Well he is right, sort of. It is taxable income - you just have to make sure that you pay the correct amount of tax.

You can claim back to 2002/03 tax year. Ask your savings provider to give you a tax deduction certificate for each of the tax years.

evenasus

ceeforcat wrote: »

Well he is right, sort of. It is taxable income - you just have to make sure that you pay the correct amount of tax.

Sorry, I should have expressed myself more clearly.
My husband thought that savings interest didn't qualify as part of the allowances.

You'll like this...he works in finance.:rolleyes:

evenasus

ceeforcat wrote: »

You can claim back to 2002/03 tax year. Ask your savings provider to give you a tax deduction certificate for each of the tax years.

Just requested certificates from one building society for each of my taxable accounts.

May sound a bit dim but I presume I don't need to request a certificate for the ISA accounts do I?

mtem74

as the isa is tax free you dont have to declare it and therefore can ignore it when looking at whether or not your are due a repayment.

Therefore your only taxabl eincome per your post is the state pension and the interest from savings. As you've already been taxed at source on the savingsd (20%) that tax man won't come after you for the 2%. They only care about it when you are liable at higher rate.

But as you haven't used the full 10% rate, you could claim a refund against some of the tax paid against your savings

mtem74

sorry meant to say full personal allowance not 10% band.

MrBeans

That's the beauty of ISAs, all the interest is tax free. Obviously worth putting your £3600 into an ISA each year if it would otherwise be in a taxable account. There are some good 1 year fixed rate ISAs around at the moment including one from NatWest which, if my eyesight did not deceive me when I was in the bank today, yields over 7% including a bonus for the first 12 months.

evenasus

I filled in and posted the R40 forms over a month ago.

Can anyone please tell me, how long the Inland Revenue take to pay the refunds? Anyone claimed in recent months?

Mikeyorks

I claimed a refund on behalf of my Mum's estate recently - and it was in the Exor account in 3 weeks.

But ..... in my experience that's highly unusual. I claim a refund based on a CITR account yearly and that takes 2 / 3 months. Which - judging from these threads is more the norm you should expect. In particular if you're claiming several years.