State pension- taxable income? And question re: gross interest on savings

quatro

I thought state pension is classed as taxable income - but someone has told me it isn't. I'm sure they are wrong, maybe someone can clarify this please?

Also can I check that I am entitled to gross interest paid on a savings account as my state pension is going to be about £4900, thus about £1575 under the single persons allowance for the tax year 2009/10.....and the annual interest on the savings amount will be below that [it will produce about £950 per year interest].

I have also another savings account which I will not claim gross interest on, but I think I'm entitled to about £500 of the annual interest paid gross in that account. How do I claim this - do I claim retrospectively using a R40?

And how much of interest generated from savings above the single person tax allowance is taxed at 10% not 20%?.....and how do I claim this, with a R40?

Thanks for any advice and info

CLAPTON

how old are you?

quatro

Nearly 60 - so basing my calculations on that age, and preparing for the future, and having to use savings and interest to top up my state pension.

BoGoF

Yes state pension is taxable income.

Regarding your point regarding gross interest - if your total income is above your personal allowance then you cannot register any of your savings accounts to have gross interest paid. It is an all or nothing situation and cannot register just one as the interest on that particular account does not take you above your allowance. You would have to have both taxed and claim tax back at the end of the year.

Mikeyorks

The State Pension is taxable. It's paid gross ... but you have to pay tax on it if it exceeds your allowances.

In your case (bearing in mind a previous thread : http://forums.moneysavingexpert.com/showthread.html?p=19172131#post19172131 ) .... your total income is Pension + gross interest. If that comes to above your Personal Allowance .... then you're a taxpayer and you can't claim interest gross by filing an R85. You're not allowed to 'juggle' some of your interest gross - to the level of your allowances - and declare the rest as net.

But if your pension is as low as £4900 (no Pension Credit?) ...... then you've got a ceiling of £1575 gross interest allowable in 09-10 before you need to worry. But if you do exceed that - you have to suffer the 20% source deduction - then claim back after the year end on R40.

If your 'earned' income is £4900 .... then the next £1575 of your interest is tax free. And above that ... the next £2440 would only be chargeable at 10%.

quatro

So am I wrong in putting in a R85 for one savings account?

I assume you are saying I should pay tax on the interest from both accounts and reclaim at the end of the tax year using a R40 form?

When should I send the form to the Inland Revenue, before the 1st April 2010 or after?

quatro

Mikeyorks - I do not now qualify to get pension credit as I have inherited a sum of money [now going into savings] so income is going to be £4900 state pension, [plus Disability Living Allowance which I believe is not taxable so therefore does not count as income]....plus any interest from the savings.

Mikeyorks

quatro wrote: »

A) So am I wrong in putting in a R85 for one savings account?

When should I send the form to the Inland Revenue, before the 1st April 2010 or after?

A) You are if your total income for 09-10 will exceed £6475. If it's below that then you can R85 all your accounts ..... pointless doing one and not the other(s)? If it's above ..... no R85's should be put in place.

After 5th April 2010 .... and when you know how much interest you've had / tax deducted. Most people will wait for the Interest certificates (can be up to end May) ..... but you don't have to send them with the R40.

quatro

Thanks mikeyorks for all the info, appreciated.