Interest - Non Tax Payer

Anagran

Hi,

I was wondering if anybody could clarify what happens with tax on interest on your savings. I understand that banks automatically take off 20% and if you are below the threshold you fill out a form so tax is not deducted. I have read HMRC website but still a bit confused. I have always been a tax payer since leaving education, but now my income has dropped and it is unlikely that I will need to pay income tax this tax year and also the following year, but hopefully I will be able to increase my income again back above the limits after this.

Should I fill out the form now as I think I wont earn enough (if i do what happens if i am wrong and should pay tax?)

Or would it be better to wait to the end of the year and reclaim the tax?

Do I need to fill in 1 form per bank or one for every account?

What about a joint account I hold with a tax payer?

Is it all interest added to your account during the year that they dont tax, or is it interest earned during the tax year? For example if you have a regular saver running Jan 13 to Jan 14 with annual interest, would all interest be tax free or just the interest earned after 6th April?

Thanks
A

lisyloo

If you think you will most likely not pay take then fill out the R85 form.
If your circumstances change then you can always contact HMRC and pay the tax later on.
You can reclaim the tax but you'll have to wait for your annual statement from bank (usually May/June) then fill in a form then wait for it to come back.

Do I need to fill in 1 form per bank or one for every account?
What about a joint account I hold with a tax payer?

One form per person.
Joint accounts are considered 50/50.
If you are married then it's better for your spouse to gift you the money and put it in your name (perfectly legal and above board). This exposes the spouse doing the gifting a little but only if you aren't in a trusting relationship.

Is it all interest added to your account during the year that they dont tax, or is it interest earned during the tax year?

The form will apply from when they receive it.

would all interest be tax free or just the interest earned after 6th April?

The interest counts when you get it. It's not pro-rated.
So for tax purposes you are deemed to have receive it all in Jan.
If you were paid monthly it would be different.
So for your situation you are deemed to have earned it all in Jan even though you earnt it throughout the year.

Vortigern

HMRC Helpsheet:
It should be one form per bank. For a joint account with a tax payer, you can submit R85 for just your half of the account. For all accounts, regular or not, interest is taxed (or not) on the date it is added to the account.

colalba

If you have online access to the accounts some banks will allow you to register for the interest to be paid gross. As this is often just ticking a box it is easier than filling in the full R85 paper form.

Vortigern

lisyloo wrote: »

The form will apply from when they receive it.

Banks can backdate to the start of the current tax year and pay back tax paid on interest paid since then. (Not much use when we're less than a fortnight in to the tax year)

xylophone

http://www.hmrc.gov.uk/helpsheets/r85-helpsheet.PDF
http://www.hmrc.gov.uk/forms/r85.pdf
At least one per account provider - for example if you had two accounts with ABC Bank, you would be abe to fit in both on this form- if you had three accounts with ABC bank then two forms.

One account with each of four providers, one form for each and so on.

If you have internet access, you may be able to tick box on line but some providers do not permit and insist on signed form.