I'm going to lose my tax-free status - What shall I do?

James_Bond

Hi.

I'm soon to leave school and earn a certain amount of interest which.. until a few months time, is tax-free.

However, when I am to leave, I believe the interest will be taxed. Is there anything I can do about this?

What about moving my money to an offshore account - or is this not an option?

I understand that the tax wont hardly make a diference for now, but in the future, I'm not too keen on the government getting hold of my hard earned interest.

Sorry about the rather over-optimistic question. Any advice/help would be appreciated though!

JB :money:

dunstonh

However, when I am to leave, I believe the interest will be taxed. Is there anything I can do about this?

Everyone can earn at least 5035 a year tax free. The fact you are at school or at work has nothing to do with it.

So, if you are earning less than that in interest, it wont be taxable. If you are earning more then you should be paying tax on the amount above 5035 and rightfully so as it means you have around 100k in the bank.

James_Bond

dunstonh wrote:

Everyone can earn at least 5035 a year tax free. The fact you are at school or at work has nothing to do with it.

So, if you are earning less than that in interest, it wont be taxable. If you are earning more then you should be paying tax on the amount above 5035 and rightfully so as it means you have around 100k in the bank.

Are you sure?

On one of my bank accounts, ( a mickey mouse one) I get taxed on the interest because I didnt declare that I was a student. It's only about 2p a month anyway but I dont want this happening with real money.

On my other accounts, I have declared that Im a student and therefore don't pay any tax on the interest as it clearly states that the gross ammount is the same as net amount, i.e no tax deduction.

Perhaps I am thinking wrong?

Hoddie_2

Being a student does not entitle you to any tax relief at all. This is a common myth. A two-year old earning £6,000 a year (model?) would pay as much tax as a 60-year old earning the same amount.

You must have told your bank that your income is less than the tax-free amount (form R85 normally). If this isn't actually the case then you need to tell them to start deducting tax.

Edit: I meant R85 obviously (and not P85 as I stated to begin with)...

impy78

Hoddie wrote:

Being a student does not entitle you to any tax relief at all. This is a common myth. A two-year old earning £6,000 a year (model?) would pay as much tax as a 60-year old earning the same amount.

You must have told your bank that your income is less than the tax-free amount (form P85 normally). If this isn't actually the case then you need to tell them to start deducting tax.

Erm.. it does...

HM_Revenue_and_Customs_website wrote:

Your employer may be able to make payments to you free of tax and NICs in certain circumstances when you are taking a full-time course, including a sandwich course, at university or technical college. Your employer would be making such payments to support you while you are studying full-time and not for when you are working at your job.

To qualify for the exemption from tax and NICs you must satisfy the following conditions:

* be receiving full-time instruction at a university, technical college or similar educational establishment which is generally open to the public and offers more than one course of practical or academic instruction; and
* be enrolled for at least one academic year; and
* attend the course for at least twenty weeks in that academic year or if the course is longer you must attend for at least an average of twenty weeks in an academic year.

If all of these conditions are met your employer may pay you up to £15,000 tax and NIC free for the 2005/06 academic year commencing on 1 September 2005 to cover the periods while you are studying. Such payments would cover lodging, subsistence and travelling allowances but tuition fees are excluded from the exemption.

http://www.hmrc.gov.uk/students/wf27_1.htm

molerat

Declaring you are a student has nothing to do with it. You need to complete a R85 to declare that you will earn, including any interest from the bank accounts, less than the tax threshold.

impy78

Excuse me everyone...but my post above quotes directly from the HM customs and revenue site, which states that the threashold for stuents is £15k, if you fulfill the criteria.....

James_Bond

impy78 wrote:

Excuse me everyone...but my post above quotes directly from the HM customs and revenue site, which states that the threashold for stuents is £15k, if you fulfill the criteria.....

Thanks impy78, I'm sure I wasn't going mad! lol!

Hoddie_2

Impy78, the threshold for students is not £15,000. You are quoting out of context. The regulations allow employers to cover specific expenses incurred as a direct result of being a student (such as subsistence and travel), it does not allow them to pay a wage free of tax or National Insurance.

impy78

Ah, I totally misunderstood it then.... sorry

James_Bond

impy78 wrote:

Ah, I totally misunderstood it then.... sorry

I'll take that thanks back then :P