Tax on savings interest; how much do they take off?

quatro

A: I shall soon have savings earning interest, and need the interest [such as it is] to supplement my pension.
When the interest is worked out, do they deduct 5% of the interest - thereby an interest rate of 3% gross [for example] providing 2.4% net interest?

[I'm asking because in a newspapers money pages today they quoted a net interest figure which had 40% deducted from the gross interest rate - surely that is for high tax payers?]


B: Also, my pension will be about £4,900 per year, well under the single persons allowance [which I believe will be £6475, for 2009-2010]. I will have 2 savings accounts, one easy access, one fixed rate.

Shall I fill in a R85 for the savings account which will produce about £1000 gross per annum.....or wait until the year-end and apply for a rebate for both accounts?

Thanks for any advice, I'm not up with savings/tax rules so please bear with me.........

Mikeyorks

A) No, the standard deduction is 20%. I think you intended to say 1/5th? As the 20% fits to your example of 3% gross equates to 2.4% net.

If £4900 is your total income + the £1000 gross interest on top? Then, yes, you are not a taxpayer and can file an R85 against any accounts that are paying interest. Much easier than claiming back after the year end.

And don't forget to R85 any current account that pays interest.

quatro

Yes - I did mean to say 1/5th [20%].
I will put in my R85 rather than claim rebate - thanks mikeyorks