Tax question: Does net interest from savings count as income?

quatro

My pension is under the tax allowance but I have savings which bring in about £2500 Net per annum [with the tax deducted].
Does this amount [which takes me over the tax allowance] count as 'income' and is added to my annual amount of pension?

I was hoping I could put in an R85 form for half of my savings [so the interest is just under the allowance for the year] and get the interest paid gross.....

Please can someone give me some more information thanks

lisyloo

Yes, I believe savings income is taxeable.

There is a 10% savings rating that might apply in your case if you meet the criteria.

Could you put your saviings in an instant access ISA to simplify matter? You have enough time before this April but you'd need to get moving on it if you want to use this years allowance.

Lokolo

You are not allowed to get R85 for half savings to get paid gross.

There is a 10% band where you only pay 10% tax.

See http://www.hmrc.gov.uk/tdsi/ten-per-cent-guidance.htm

an example to go with it

http://www.hmrc.gov.uk/tdsi/example23.htm

quatro

Thanks lisyloo - I think the 10% you mention is for people over 65?? and I am not.
Seems I cannot put in an R85 form for part of my savings then....

Lokolo

quatro wrote: »

Thanks lisyloo - I think the 10% you mention is for people over 65?? and I am not.
Seems I cannot put in an R85 form for part of my savings then....

No it is not. See my post.

quatro

Lokolo that link is really helpful - thanks for that.....

glider3560

The easiest way to claim the 10% is to fill in an R40 at the end of the tax year. Provided you complete it correctly, HMRC will calculate how much you have overpaid and will issue a refund fairly promptly.

lisyloo

Rather than fill in somewhat complicated tax forms and wait for a refund, why don't you just get an ISA?
No interest, no reclaim, no forms (yes I have done them before).

As with any other savings account you do have to "tart" to get the best rates, but I don't think ISAs are any worse/better than ordinary accounts in that respect.

RayWolfe

quatro wrote: »

My pension is under the tax allowance but I have savings which bring in about £2500 Net per annum [with the tax deducted].
Does this amount [which takes me over the tax allowance] count as 'income' and is added to my annual amount of pension?

The gross income is your income for tax assessment purposes. So you have to add your gross pension to your gross interest to see if you have a tax liability, Don't forget you have a higher personal allowance if you are over 65.

Stompa

lisyloo wrote: »

Rather than fill in somewhat complicated tax forms and wait for a refund, why don't you just get an ISA?

If it's bringing in £2500 Net per annum, it must be a fairly substantial amount, many times greater than the ISA limit.

lisyloo

If it's bringing in £2500 Net per annum, it must be a fairly substantial amount, many times greater than the ISA limit.

Good point. I did think about the ISA limit but the figures hadn't registered.
A tax free option is index-linked NSI certificates but you have to tie up your money for at least 12 months.
They are paying RPI+1% which at the moment is 4.7% right now, but obviously you are taking a punt on what happens with inflation, and it is expect to come down from that level.

I wouldn't chose an investment to avoid filling out a form, but it's an option to consider.