Pse Help? - Higher/Lower rate taxpayer - how do they know?

Moe09

Hi folks,

Sorry if I'm being completely dim but can someone please enlighten me on the following:-

In Martins information on whether to 'Pay off your Mortgage vs Savings Accounts' he says:-

'......To earn £600 a year after tax on £10,000 in a savings account, a basic rate taxpayer would need an interest rate of 7.5% and a higher rate taxpayer an enormous 10%........'

But my question is how does the bank/bldg society who is offering/holding the savings account know what you pay in income tax - whether you pay high or basic rate tax?

Also I was made redundant last October and so am now paying no tax at all on no earnings (husband is only providing the income now and I don't qualify for benefits so haven't signed on with DSS). Should I tell my bank/savings account holder - ie.If I tell them I'm not working does it mean I don't have to pay tax on my savings' interest??

RayWolfe

It doesn't. They will deduct 20%. You must tell the tax authorities about the interest received.
If you ARE entitled to tax free interest, you must give the bank/bs an R85 form declaring such.

Robert_Sterling_3

The Tax Offices know how much you have been paid in interest by banks and building societites and you are asked to state the amounts on your income tax form.

Moe09

Thanks RayWolfe - I wasn't thinking about tax returns since don't think I earn in higher bracket. Do you get the R85 from the tax office?

Moe09

Robert_Sterling wrote: »

The Tax Offices know how much you have been paid in interest by banks and building societites and you are asked to state the amounts on your income tax form.

Thanks to you also Robert.

alanq

Moe09 wrote: »

Do you get the R85 from the tax office?

Banks and building societies can provide them or you can download from HMRC web site.

http://search2.hmrc.gov.uk/kbroker/hmrc/forms/viewform.jsp?formId=835