personnel allowances not used up

sanfly

we will retire soon and will not fully use our personnel tax allowances, we asked the tax office if we could offset the unused allowance against our savings, answer yes, but we would have to pay tax on our savings and reclaim it every year.
Can we just tell our bank / B.Soc to stop taking a tax deduction and let the inland revenue reclaim the tax back from us every year. advice please.....thanks

jem16

As far as I'm aware you can only ask the bank to pay interest without taking tax off if you declare yourself to be a non-taxpayer.

When you say you will not fully utilise your tax allowances what exactly do you mean? Is your income above the level for paying no tax but only in the 10% band?

If this is the case the bank will pay your interest net of tax at 20% and you will have to reclaim the difference each year from HMRC.

whatatwit

As jem16 says, you can only register to have interest paid gross if you are not liable at all.
Also, you cannot register one account and not another.
The repayment claim form is not as long as a self assesment return though.

Are you making full use of ISAs as these are not taxable (within the rules of ISAs)

Mikeyorks

jem16 wrote:

As far as I'm aware you can only ask the bank to pay interest without taking tax off if you declare yourself to be a non-taxpayer.

.

That's right .... as the R85 whereby you obtain interest gross, has a declaration to that effect.

It sounds as though you are saying your income does not take you above your personal allowance. But your income + interest does? In which case you have to suffer the 20% deduction from the interest - and then claim any excess back.

jennifernil

I would fill up an R85 form anyway and see how it goes. If you do need to pay a little tax you can fill up a self assessment form.

Mikeyorks

jennifernil wrote:

I would fill up an R85 form anyway and see how it goes.

Unlike you to make, IMHO, a dubious suggestion of filing a false declaration?;)

Given the mandatory data that HMRC receive for interest bearing accounts - and the data management tools they have for co-ordinating multiple sources of data to individual taxpayers .. it poses a risk of exposure.

When taken in the context that the enquiry to HMRC resulted in their records being accessed - and probably noted ....... it ups the risk to unacceptable proportions?

jennifernil

Sorry, did not make myself clear!
What I meant was that if they are unsure whether the interest would take them over the limit then they could register for gross tax, review the situation regularly and cancel the registration if required.
There could also be a saving by rearranging the savings if one partner's pension was lower, or if only one partner was receiving a pension.
The situation will also change as interest rates rise or fall. Also savings may be used from so less interest earned. Or some could be transferred to ISAs each year to avoid being taxed.
And the situation in the first year of retirement, when there is both earned income and pension income, will be different from the following year when there will be only pension income. So a lot of things to consider. Some serious arithmetic called for I think.
If it is obvious that the OPs will be liable for tax on their savings then of course they must not fill up an R85.

Mikeyorks

jennifernil wrote:

And the situation in the first year of retirement, when there is both earned income and pension income, will be different from the following year when there will be only pension income. So a lot of things to consider. Some serious arithmetic called for I think.
If it is obvious that the OPs will be liable for tax on their savings then of course they must not fill up an R85.

Pleased I judged you correctly;)

Good point you make about the transition year. Partly depends when, in the year, retirement occurs. But one way to handle this is to open new annual accounts to drop any lump sum into / move other savings into - in order to minimise the interest in the transition year. And take it the following year - when there's some slack in the allowances.