tax question on savings income

malkbk

My elderly mother (on state pension) sold her house in 2006 and for a period of time Sep t 2006 onwards was receiving interest (tax free) of approx £2400 /month.In 2007 at the end of March she bought another house for approximately half her savings and continued to get interest on the rest till end June 2007.
My question is , as this was an exceptional occurance , and my mother normally only has her pension , can she use allowances from other years to reduce this tax bill?

CLAPTON

no
you pay income tax on the income you receive within the tax year

trevormax

any tax free personal allowance not used this year does not carry on to next year, basically you use it or lose it. If she only gets bank interest and a state pension, her state pension might not use all of her personal allowance each year. If so, her unused personal allowance can be used against the bank interest earned in that year only. This might reduce her liability.

Why was her interest being paid tax free? The only way a bank will pay you interest tax free is if you send them a form (R85) stating you are not liable to tax. Are you sure she sent them this form? if not then tax at 20% should have automatically been deducted by the bank.