Tax on savings interest

George_Mainwaring

I'm currently unemployed and living on savings, and have been for the whole of this tax year.

I have most of my savings in normal fixed and easy-access savings accounts in a high street bank, so I'm paying tax on the interest. 20%, I think?

Given that this is my only income, am I right in thinking I could either claim the tax back or not have it deducted at all? It's certainly well below the £10,000 threshold for paying income tax.

How would I do this, and is there any reason I shouldn't? Obviously, I'd tell the IR if I went back to work or received any other form of income.

I'd rather deal personally with the Inland Revenue rather than my bank, as I once had an elderly relative who was contacted by the IR to advise them to claim tax back for their savings interest, and stop it being deducted in the future. However, when they spoke to the bank about it, the bank wanted to know all sorts of intrusive questions that were clearly more about gathering data for advertising purposes rather than anything to do with tax or the Inland Revenue. I can't imagine your tax liabilities are affected by whether you have a will, own your own home or how many children you have, etc

nomunnofun

For previous years complete a form R40. At the end of this tax year, when you have all the figures from your accounts, do likewise. The form is here:

http://www.hmrc.gov.uk/forms/r40.PDF

Do not forget that, even after using your personal allowance, there is a 10% savings rate also.

To prevent tax being deducted in the future complete the form below and forward to your bank/building society.

http://www.hmrc.gov.uk/forms/r85.pdf

xylophone

£10,000 threshold for paying income tax.

I don't recognise this tax free allowance?
http://www.hmrc.gov.uk/rates/it.htm
http://www.hmrc.gov.uk/taxon/bank.htm

George_Mainwaring

nomunnofun wrote: »

Do not forget that, even after using your personal allowance, there is a 10% savings rate also.

Thanks for all the info. Given that my interest will be under £8105 and I have no other income, does that mean I should pay no tax at all?

After reading the Inland Revenue website, my understanding is that the 10% rate only applies to £2710 of interest earned above £8105. So even if I earned £5395 in wages or other income, and then got £2710 in interest on my savings, I'd be liable for £0 tax. But if I got £2720 in interest, I'd be liable for £1 in tax. Have I understood correctly?

xylophone wrote: »

I don't recognise this tax free allowance?

I'm probably thinking of the £8105 figure.

xylophone

http://www.hmrc.gov.uk/taxon/worked-examples.htm