R85 form question

trashcan_2

Hi,

At the moment I receive income capacity of £4394 per annum that £84.50 per week.
I have £12,000 worth of savings that at present I receive my saving interest gross, as I have already filled in the form R85.

But now my circumstances are changing as I am about to inherit £15,000.

As I will be putting this in a savings account that pays interest yearly, do I need to tell the bank to stop the R85 form straight away or don't I have to tell them to the end of the tax year when I receive the interest.

Thank you for your advise.

oldfella

you are unlikely to have to pay tax even with the additional £15000, assuming you have described all your income

if you do have other income, you dont need to do anything until the tax year where tax is payable

trashcan_2

I have no other income. I did a calculation on the http://www.hmrc.gov.uk/calcs/r85/ website and put in the extra income and it said that i was over the limit.

CLAPTON

well you can have an income of 6035 before tax is due

you have 4394 in IB (I dont know if this is taxable or not) but if it is then that means you can have a further 1,641 in interest before tax

now maybe you have some of the 12,000 in ISA savings which are tax free and doesn't need to be included
but lets say not and you are earning 6% on 12,000 which is 720 in a full year

so that leaves 921 to go

well if you haven't received your extra 15k yet then there is no way you will make much interest this tax year

to be save I would suggest you put 3600 in an ISA now and a further 3,600 next tax year then you will be comfortable below the taxable limits for next year too i.e. your total potentially taxable savings will only be £19,800

uzzah

I have used up all my Isa allowance this year and all I have mentioned is my taxable savings and I have not included my ISA's. Although I do not pay tax on my Income capacity, it is taxable benefit.

Thanks.

oldfella

you may be confused with the inheritance - its not income. The only income you would have is interest on the 27K plus the benefit.

uzzah

No I am not confused. MY Income capacity + interest from £27000 according to the http://www.hmrc.gov.uk/calcs/r85/ website puts me over, it said (Result - The Income you have shown on the checker is more than your tax allowances. Please do not fill in the form R85.
Does it put me over as soon as I get the extra money or at the end of the tax year?

Thanks for your help.

jennifernil

Only in the tax year in which you receive the interest. And now that rates are falling, you might not be over anyway.

On £27000 you will need a rate of over 6% gross to even reach your tax free allowance.

6% on £27000 = £1620

1620 + 4394 = 6014

Which is less than the allowance of £6035.

It is probably an old form and is not using the correct allowance.

oldfella

a generous 6% of 27K = 1620, plus 4394 = 6014

tax starts at 6035 in 2008/9 - it will be higher in 2009/10 by the time you get interest on your inheritance

you need to do the calc for the tax year the income is actually received

sloughflint

trashcan wrote: »

Hi,

At the moment I receive income capacity of £4394 per annum that £84.50 per week.
I have £12,000 worth of savings that at present I receive my saving interest gross, as I have already filled in the form R85.

But now my circumstances are changing as I am about to inherit £15,000.

As I will be putting this in a savings account that pays interest yearly, do I need to tell the bank to stop the R85 form straight away or don't I have to tell them to the end of the tax year when I receive the interest.

Thank you for your advise.

Several things to bear in mind. When you get your inheritance, will it be in a new account that will pay interest yearly on account opening anniversary (ie 09/10) or a date still within this tax year?
If it is a date within this tax year, you will only receive interest on the inheritance for a proportion of the year.

Your income will be made of:

all of your IB
one year's worth of gross interest on 12k
At worst a third of a year's worth of interest on 15k ( eg Dec to Mar?) if interest payment falls into this financial year.

It's not just a case of feeding 27k in a basic online calculator.

I reckon it is VERY unlikely that you will be due to pay any tax for 08/09.