Very confused on whether i need to pay tax or not?

cheekykid

I do not work

I have savings with interest per year over 6k.

Whenever I open a bank account they ask me if am a tax payer. I am not since I dont work but am I eligible for a tax free status?

From what I understand I am not and I simply need to pay tax on my savings and then simply claim back the tax paid for the first 6k allowance right?

Thanks

Biggles

cheekykid wrote: »

I have savings with interest per year over 6k.

Well, that means you are a taxpayer, so your understanding is correct.

sloughflint

cheekykid wrote: »

I do not work

I have savings with interest per year over 6k.

Whenever I open a bank account they ask me if am a tax payer. I am not since I dont work but am I eligible for a tax free status?

From what I understand I am not and I simply need to pay tax on my savings and then simply claim back the tax paid for the first 6k allowance right?

Thanks

Several things to consider.

OP see here on what counts as taxable
If no other form of taxable income other than savings interest:

Do not count any ISA savings interest.
Then add together the remaining interest from other accounts.That may bring you below your allowance.

Then if your only taxable income is savings interest, I believe that should be taxed at 10% on £2320 worth of savings interest over your tax free personal allowance rather than 20%.
http://www.hmrc.gov.uk/rates/it.htm

So if all your non ISA savings interest is currently being taxed ( at 20%), you will most likely be eligible for a rebate ( R40 form):

http://www.hmrc.gov.uk/incometax/tax-free-interest.htm
http://search2.hmrc.gov.uk/kbroker/hmrc/forms/viewform.jsp?formId=818

If your taxable income is below your personal allowance, then you should not be paying any tax and should complete R85 forms on each account.

If you have overpaid tax for previous years, complete R40 forms for the last 6 years.

cheekykid

Many thanks sloughflint

Basically ill just fill a R40 form for any tax overpaid right? Do I need to calculate everything or tax revenue will know how much exactly i have overpaid?

sloughflint

Again it depends.
Only you can tell if your taxable income is less than £ 6035. If it is, by filling out R85s that covers you for this financial year ( banks will just readjust future interest payments) and you can reclaim other tax years using R40s.

If however, your taxable income is over £6035 then yes, you'll need to fill out an R40 for this year too.

I've taken a quick look at the R40. It seems straightforward enough.
http://www.hmrc.gov.uk/forms/r40.pdf

help notes

cheekykid

sloughflint wrote: »

Again it depends.
Only you can tell if your taxable income is less than £ 6035. If it is, by filling out R85s that covers you for this financial year ( banks will just readjust future interest payments) and you can reclaim other tax years using R40s.

If however, your taxable income is over £6035 then yes, you'll need to fill out an R40 for this year too.

I've taken a quick look at the R40. It seems straightforward enough.
http://www.hmrc.gov.uk/forms/r40.pdf

help notes

So basically i need to check all my statemets etc. and add up all my taxable interest earnings? How do they know if I lie or not?

cheekykid

sloughflint wrote: »

HMRC would know if you lied;)
I'm afraid so for previous years.

I wonder why I have to do the adding up in the first place if they have all the details?

Only for previous years I need to calcuate everything not for the current one?

sloughflint

cheekykid wrote: »

I wonder why I have to do the adding up in the first place if they have all the details?

Only for previous years I need to calcuate everything not for the current one?

Cheekykid, I'm sorry but I cannot answer your questions categorically since I do not know your exact financial position.

If you feel that your taxable income is below your personal allowance this year, then no you won't need to do a R40 at the end of this year. Simply do R85s now for each account you hold.

For previous years, the R40 form needs details of your savings interest and tax paid ( boxes 3.1 to 3.3). That is why you will need to add up the amounts from various accounts.

As for why? HMRC get details from banks I believe but probably don't check everyone hence why we are expected to do the donkey work of adding up.

Finally, I will just reiterate that you must not count ISA interest but do count all other forms of taxable income ( eg pension, some benefits etc)

cheekykid

After doing some calculations I have found out that for this financial year I won't go over the £6035 threshold. In light of this how do I get my money back? Do I need to wait for the end of this financial year and then use R40?

cheekykid

sloughflint wrote: »

No........

With the R85 they will refund the tax I paid back and wont tax me till the end of this financial year? If yes how do they know for sure that I wont go over my allowance? each year i need to fill a new r85?

thanks!

sloughflint

cheekykid wrote: »

With the R85 they will refund the tax I paid back and wont tax me till the end of this financial year? If yes how do they know for sure that I wont go over my allowance? each year i need to fill a new r85?

thanks!

Yes.
They don't. Your responsibility to advise them if not the case.
No.