Tax & savings

Ordep

I'm 65 and have been retired for some years now. I have, in the past, worked at Waitrose for about 18 months part time.
I have about 100k in a building society and 750 shares with Standard Life.

My question, is do I have to pay income tax on my savings.
I am paying tax on my savings at the moment.

Advice would be very much appreciated.
Ordep

glider3560

It all depends on your total income for the tax year in question.

Everyone has a personal tax-free allowance of £6475 per year. This is increased to £9490 for people 65 or over. This is the amount of income you can receive before you start to pay tax.

Ordep

Thanks for your prompt reply glider.
Thant very usefull

lisyloo

At 65 you have a personal allowance of £9,490 for the year April 2009 - April 2010.
So you can get that amount in income and pay no tax.

I believe that state and private pensions count as income as does savings interest.
So you need to add together your pension income, any earned income, and savings income and any other income to see whether it exceeds this figure.

If you are living off less than this amount then you pay no tax.
If this is the case then you can fill in an R85 form to pay not tax in future.
You fill this in at your savings bank and they stop taking any tax.

To claim back tax from the past the bank MAY be able to help you if they have an arrangement with the Inland revenue. If not then you will need to get form R40 from the inland revenue and make a claim for past tax years.
Although of course bear in mind that the allowance pre age 65 is lower and that would appy in previous years if you are only jsut 65.

Otherwise you will have to pay the tax that you bank deducts automatically.
You can start moving some of your money into a cash ISA with an allowance of £5,100 per year.
You could also invest some of it to avoid income tax, but you'd need to take advice on what is most suitable for you needs and attitude to risk, so you'd need to speak to an advisor.
Another possibility is NSI index linked savings certificates.
They pay RPI (retail prices index) plus 1% which currently makes 4.7% and these are tax free.
I've just been looking into this myself and forecasts for 2010 and 2011 are RPI of 2.9% and 3.0% respectively.
So these are considered a relatively good, safe and tax free investment at the moment.