OAP Tax Question

Somerset

My mother ( OAP ) has just got off the phone to me. She's been going on about tax deducted from her interest on savings. She seems to be convinced that she can earn 10K in interest plus her state pension, and pay no tax. She says she's talked to someone at the CAB who's told her this and she's going to ask for a form from HMRC to get her interest paid gross.

Now I know you can get your interest paid gross, but 10K in interest plus state pension seems an awful lot of 'tax free income' to me. My mother also has a habit of hearing only what she wants to hear.

Does anyone know if she's right or barking ??

CLAPTON

people over 65 have an age related tax allowance of 9490 (9640 if over 75) subject to reduction if their income is over 22,900 pa

so she'e no completely correct but she's not completely wrong either.
she probably is due a tax refund.

best to speak to the HMRC

noelphobic

think she's 'barking'! Interest on ISAs is tax free but otherwise interest on savings is normally only tax free up to your allowance, which I am pretty sure is less than 10k.

I am sure someone will be along with more specific information soon though.

noelphobic

CLAPTON wrote: »

people over 65 have an age related tax allowance of 9490 (9640 if over 75) subject to reduction if their income is over 22,900 pa

so she'e no completely correct but she's not completely wrong either.
she probably is due a tax refund.

best to speak to the HMRC

Didn't realise the allowances were that high. However, I would imagine any pensions would need to be included in that figure?

Mikeyorks

I wouldn't be so rude ... but she's not right.;)

Maximum personal allowance is £9640 .... and that's if she's over 75. Deduct her State Pension from that (£5k/£6k ??) ..... and it leaves a gap .... but certainly not that she's intimated.

Perhaps it was 'interest on £10k' ..... that was discussed? There's also a 10% band for Savings interest ..... perhaps that.

If you post her gross State Pension (+ any occupational pension?) / approx gross interest .... and her age (being an 'OAP' ....the female version ... her PA can range from £6475 to £9640, depending on age band) .... someone will work it out.

But stop her getting an R85 (for gross interest) in the meantime .... unlikely to apply to that level

Somerset

Thanks all

The bits I know ( she's cagey about her finances )
State Pension for One ( widow ) no idea how much.
No other/occupational pension.
Age 76
Savings maybe 200K ( I'm only guessing ). Assuming 3% p.a. that means 6K ish gross interest p.a.

The P.A. that you're quoting (£9640) is close enough to the 10K she's wittering on about. I wonder if she's been told that number and just got it into her head that it all relates to interest she's allowed to earn ?

Just to clarify - the £9640 would/should include all other income, specifically her state pension ? Anything between total pension and £9640 should be tax free, and presumerably she's need to complete a Return to get a refund, anything over the £9640 is taxable as normal.

I knew what she said didn't sound right - too high. But then I'm never right when it isn't what she wants to hear:rotfl:

Mikeyorks

Somerset wrote: »

Just to clarify - the £9640 would/should include all other income, specifically her state pension ? Anything between total pension and £9640 should be tax free, and presumerably she's need to complete a Return to get a refund, anything over the £9640 is taxable as normal.

Yes .... any of her interest that falls between her pension and the £9640 is at 0%. But ..... the next £2440 of her interest is only chargeable at 10%. Then (presumably as deducted at source) the rest is at 20%.

Sounds very much that an annual refund (and possibly for past years?) via R40 is called for. But she can't file for gross interest unless her State Pension + gross interest is £9640 or less.

Worth putting the thumbscrews on, nicely, and getting a reasonably accurate figure of her State Pension .... then one of us can give you chapter and verse on what she can claim back? eg ... if her State Pension is as low as £5k ..... then none of her interest is chargeable at 20% unless her gross interest exceeds £7080 (£9640 PA + £2440 10% Band - £5k SP = £7080)

Somerset

Thanks Mikeyorks

I'll have a chat with her but as I said she's cagey. Think I'll explain it as best I can, maybe write it down, and let her mull it over.

Mikeyorks

If she's on basic pension (pension credit not applicable with those Savings) ........ and she didn't batten down her interest rates before the storms struck in Nov / Dec (or couldn't because she relies on the Savings for monthly interest) .......... then it's quite possible her entire income is below £9640 for this coming year. As £200k at the 5% of last year ..... is a very different proposition to the 1% or 2% this?

So she may have put her figures on the table for CAB? Therefore her initial conversation with you might have been a bit garbled ... but she may just be eligible for gross this year. And she should be due a good refund for last year, if her pension leaves a sizeable gap up to the dramatically increased age related personal allowance that came in?

If she's reluctant with you (mine was .... but I just bullied her into submission!) .... might be worth checking she explored the refund aspect with CAB? And pushing her back there if not. As where pension is low and interest high ... there will generally be access to either the 10% Savings band or the 10% tax band that preceded it?

Somerset

Cheers Mike - I appreciate all the explanations :T