R85 form

trashcan_2

I have got an R85 form for a new account as I should be able to apply for this. I have it on my other accounts.
I earn about £4500 and get about £1000 interest on my savings, this keep me under the limit.
In 4 weeks time I inherit £15,000. Now as I don't know my yearly interest to the end of the year: Do I tell them at the end of the year my extra interest ? or do I have to estimate my interest now before I apply?

CLAPTON

well 15,000 at say 5% for half a year only will yield about 350 (assuming the interest is actually paid before 5 april 2009)

You already have 4,500+ 1000=5,500 so you will still be under the £6,035 limit for this tax year.... so you're OK to fill in the R85

Next year you need to review it again

trashcan_2

Thank you.

Do you check your interest on a April to April basis. If my wage income goes up I know I will have to tell them but I am unsure about the interest on savings and if I would have to review it once a year or on a day to day basis.

CLAPTON

For tax purposes, interest is counted in the tax year when it is actually paid

So if you open a yearly account now that pays out on the 1 year anniversary of opening, then the interest will be paid in Oct 209 and so will form part of your 2009-2010 tax year and not this year.

If you open an account paying monthly interest then the interest paid is in this tax year counts on a monthly basis.

You have no general duty to tell HMRC when your wages change.
If the change in wages means your total income including wages and (gross) interest is more than the tax allowance (6035 this year) then you need to tell the savings banks that you are no longer entitled to interest paid gross. At tax year end you need to tell the HMRC if you have paid too little tax.

Jonbvn

trashcan wrote: »

Thank you.

Do you check your interest on a April to April basis. If my wage income goes up I know I will have to tell them but I am unsure about the interest on savings and if I would have to review it once a year or on a day to day basis.

It is the interest earned form 6 April to 5 April next year. You should only consider the actual interest earned within each tax year. For savings accounts where the interest will be credited after 5 April 2009, then the interest should not be counted as income for this tax year.

trashcan_2

You have been most helpful.

my deepest thanks to you.

mike987654321

A different question relation to form r85.
assuming someone had no employment income and their only income was from a tenanted residential property (say £800 pcm) and bank accounts, with the latter being minimal.
in previous years the income earned from the residential property was over the annual income tax personal allowance.
now though, the property has been mortgaged and due to the mortgage being an interest only mortgage, the income will be wholly offset by the mortgage payments.
this will mean that in actual fact no income tax will be paid in that year.
however the form r85 asks you to decalre:
1) whether "your income is below your annual tax-free income limit" - it is not, the income is still £800 pcm (i.e. £9,600 pa), over the personal allowance of £6,035.
2) that "my income is below my annual tax-free income limit" - again, not true.
however, no tax will actually be payable.
it seems illogical that in these circumstances it would not be possible to get the interest payable by the banks to be paid tax free, as the tax will be repaid through the annual tax return.
should i complete the form r85 - the net effect will be the same but it would seem that false declarations would be made
thank you

Biggles

The term 'income' on the R85 means 'taxable income'.