Tax on savings interest query

Agent_C

I have a couple of queries, and would be grateful if anyone can help.

1. I took out a fixed rate bond in May 2008. At the time, I was a taxpayer, however since April '09 I have registered as a non-taxpayer. The bond is due to mature shortly and the interest is paid upon maturity. Does that mean that I will not be liable to pay tax on the interest, or is it calculated on a pro-rata basis, ie 11 months as a taxpayer and 1 not?

2. I stopped working part-way through the last tax year, so I understand that I should be able to get a rebate on some of the income tax I paid. I have obtained section 975 certificates showing the tax I paid on my savings accounts, however I had an account with Icesave. The FSCS cannot provide me with a s.975 certificate for this account. Do you think the tax office will accept a statement showing the interest I received and tax I paid, given the circumstances?

Thank you!

dzug1

Tax is payable when the interest is paid, not when it accrued - so no tax on the bond.

Pass on the Icesave question

CLAPTON

the HMRC rarely askes for documentatary evidence

BruceyBonus

The Icesave website says that s975 documents will be sent shortly.

Agent_C

Thanks all - good news all round then. Unfortunately the fixed rate bond was with Icesave, and FSCS have already deducted the tax and can't do anything about that, but at least I now know I can reclaim it. Another document to add to the pile I will be taking down to the tax office!

Mikeyorks

Agent_C wrote: »

Does that mean that I will not be liable to pay tax on the interest, or is it calculated on a pro-rata basis, ie 11 months as a taxpayer and 1 not?

If you're confident that you're not liable for tax in 09-10 .... then you can reclaim the tax deducted on the fixed term deposit. As the liability for tax arises when the interest is paid ... not as it accrues.

But you don't really appear that confident? Are you sure that your whole income (earned / pension + gross interest) doesn't exceed your personal allowance for the year?

Agent_C

I'm fairly confident - I'm currently a student and doing a bit of part time work that doesn't bring me in any more than about £200 a month. My gross savings interest wouldn't take me over the allowance either. The only danger is if I don't get any funding to carry on being a student after September, I will have to get a job, so may well end up going over the allowance. I figured that I might as well apply for gross interest now even if I have to pay tax back later in the year, as at least I will be getting some interest on the interest, if that makes sense!

suso

Agent_C wrote: »

I have a couple of queries, and would be grateful if anyone can help.

1. I took out a fixed rate bond in May 2008. At the time, I was a taxpayer, however since April '09 I have registered as a non-taxpayer. The bond is due to mature shortly and the interest is paid upon maturity. Does that mean that I will not be liable to pay tax on the interest, or is it calculated on a pro-rata basis, ie 11 months as a taxpayer and 1 not?

2. I stopped working part-way through the last tax year, so I understand that I should be able to get a rebate on some of the income tax I paid. I have obtained section 975 certificates showing the tax I paid on my savings accounts, however I had an account with Icesave. The FSCS cannot provide me with a s.975 certificate for this account. Do you think the tax office will accept a statement showing the interest I received and tax I paid, given the circumstances?

Thank you!

For what reason have you registered as a non tax payer ?,

Tax is calculated upon payment, so if you receive interest this tax year, then its added to this years earnings, regardless of the length of time it has been acquiring interest.

As for claiming a rebate for stopping working, it all depends on what you did afterwards, and if you paid any tax last year.

without knowing your total earnings (including bank interest) for last year and tax paid and tax code, its impossible to say if you are due a refund.

If you think you are due, contact your local tax office, they will ask for your P60's / P45's and a covering letter. Explain the situation regarding Icesave, if you invested 50,000 with them they will be a bit more stringent about the rules than if your invested 500,

Mikeyorks

suso wrote: »

For what reason have you registered as a non tax payer ?,

Asked at post #6 ........... answered at post #7?