Advise on tax on bank interest during career break

ejv

I've been working for some years and been a basic tax payer.
I'm taking a course in Uni for 12 months commencing Sep 2012, when I wouldn't be earning.
Can I ask my banks not to deduct tax on interests for these 12 months?

psychic_teabag

Yes, I think it's an R85 form you have to fill in. Unfortunately, tax works by financial year, so it's income April to March that matters. So if you earn enough before September to pay income tax, you probably can't get interest tax free until the following April. (Well, I'm assuming that's how it works - don't know for sure.)

Still worth using ISA allowance if you haven't already : rates are relatively high at the moment anyway, and it's good to get long-term savings into ISAs.

xylophone

If between April 6 2012 and April 5 2013 you will not have received enough income (salary and savings income) to pay tax, then you can complete an R85. Otherwise you can't.http://www.hmrc.gov.uk/forms/r85.pdf

See http://www.hmrc.gov.uk/incometax/stop-work-refund.htm
See also http://www.hmrc.gov.uk/tdsi/claim-tax-back.htm


See also http://www.hmrc.gov.uk/tdsi/example25.htm inserting the correct tax allowances for 2012-13 into the example.
http://www.hmrc.gov.uk/rates/it.htm

Mikeyorks

ejv wrote: »

Can I ask my banks not to deduct tax on interests for these 12 months?

Being a taxpayer - in this respect - runs from April to April. From Sept to Sept means you're likely to earn above your personal allowance in both years?

In which case - 'No, you can't do that'.

amcluesent

You'll likely have to complete self-assessments, that's what I did after doing a full-time Masters with part earnings in two tax-years.

ejv

Mikeyorks wrote: »

From Sept to Sept means you're likely to earn above your personal allowance in both years?

No...will be below personal allowance limit in both years

amcluesent wrote: »

You'll likely have to complete self-assessments, that's what I did after doing a full-time Masters with part earnings in two tax-years.

Can I go back to PAYE when I resume full time employment? Or would it be Self assessment forever?

psychic_teabag

Self assessment is in addition to PAYE. PAYE is based on tax codes, which are basically just an estimate of your income. SA is to give an accurate story at the end of the year.

The tax man can take you off SA if your returns are uninteresting. (My OH asked to go back onto SA because their tax estimates were compete rubbish.)

Mikeyorks

ejv wrote: »

No...will be below personal allowance limit in both years

In which case you can happily file an R85 and leave it running through both years. But kill it as soon as you know your taxable income will be above your allowance.

I can't see any reason why you would be asked to provide SA Returns if you're not earning for a year and are not in receipt of taxable benefits / bursaries etc throughout that periood.

ejv

Mikeyorks wrote: »

In which case you can happily file an R85 and leave it running through both years. But kill it as soon as you know your taxable income will be above your allowance.

For this FY,I will be working till Sep 2012.
For next FY, I will be working from Sep 2013 onwards.
So when should I be sending the R85?Do I have to call the HMRC?
I have savings account in 2 different banks.Do I send a copy to each?
Thanx in advance

jem16

ejv wrote: »

For this FY,I will be working till Sep 2012.
For next FY, I will be working from Sep 2013 onwards.
So when should I be sending the R85?

If you know you won't exceed the personal allowance this tax year, then file it now.

Do I have to call the HMRC?

Shouldn't have to no.

I have savings account in 2 different banks.Do I send a copy to each?
Thanx in advance

Both banks will need it. Sometimes they accept it over the phone so might be worth checking.

ejv

jem16 wrote: »

If you know you won't exceed the personal allowance this tax year, then file it now.

Almost certain I wouldn't cross £8105, but may exceed depending on my monthly bonus.In that case, if I call banks in Sep 2012 or even at the end of this FY, would they backdate it?

Also,both my savers are fixed and pay the interest annually.I've started them while I was in tax bracket, but interest would be paid when I'm out of tax bracket. Would that cause any problem.

Thanx:)