Confused about tax situation

emitindz

Hi there,

I am a student, currently on a gap year. From October 2006 until March 30th 2007 I was employed and my total income amounted to £5145. I did not pay tax until my last payslip where it kicked in as I guess I just ran over the allowance.

Now, I have left the company (however am still due another payslip) before the start of the new/current tax year. What position does this put me in? Am I now a standard tax payer?

Appriciate all and any advice! Many thanks.

tigtag02

Being a student does not make you exempt from tax - you are still liable to pay on anything over your allowence.

You are correct as to why you paid tax on your last payslip for last tax year.

Regards
tigtag

emitindz

Yes I appriciate that, I just want to know whether I have a new tax free allowance for this year now? The reason is that I am looking to make my savings' interest tax free while i can, aside from an ISA.

tigtag02

Your new tax code should be 522L which means you will be able to earn £5229 this tax year before you are liable for tax.

Your savings are a different matter that I dont have much knowledge of. I'm someone else will let you know if you are entitled to any further tax free savings but your wages & tax code will have no bearing on that.

tigtag

jem16

emitindz wrote: »

Yes I appriciate that, I just want to know whether I have a new tax free allowance for this year now? The reason is that I am looking to make my savings' interest tax free while i can, aside from an ISA.

Your taxable income inludes your earnings, minus pension payments plus interest from savings accounts and dividends from shares.

If the total is over £5225 for this tax year, you will be liable for 20% tax on your savings. This will be taken off automatically by the bank unless you register to receive gross interest. You can only receive gross interest if you know you will have taxable income less than your personal allowance.

So it depends on your circumstances. If you are absolutely positive you will have taxable income less than £5225 between now and April 5th 2008, you could apply for gross interest by phoning up your bank.

emitindz

Thanks alot, clears it up for me If I do happen to go over the allowance after applying for gross interest, during this financial year, what happens? Do I just pay tax on interest from when i breach the allowance or do I have to pay it all back?

CLAPTON

just write to the HMRC giving the facts and figures and they will tell you what to pay.

CLAPTON

and you only pay tax on the little bit that goes over the limit.

emitindz

Are there any legal issues?

CLAPTON

i'm not exactly sure what you mean about legal issues, but if you tell the HMRC what you earned and what other income you have (interest & dividends ) then they will work out whether you owe them or they owe you.

Now, not telling them may be a potential source of problems.