Gross Interest on Savings - Urgent Help Please!

jancollins

Hello,

I am looking for a little advice please. Due to a lengthy period of unemployment, I'll certainly earn less than the annual tax free allowance of £10k (that's correct, isn't it?) for this year (Apr 13-14). I have a savings account and informed my bank recently that I don't think I should be paying tax on the interest earned 'this year' having paid it in the past.

I today received a letter saying my savings account has been registered for gross interest, and that X amount has been immediately credited back to me. The amount looks like the tax I would have paid last financial year, I was surprised to see it now instead of when the interest is annually applied in the summer. The letter says I must be sure I am above the annual tax free allowance, which I certainly am and will be for this year. Have I carried out everything correctly?

On a separate note, over the past 2-3 years I've earned between £11-12k pa. I have always paid tax on my savings interest earned, is that correct or am I entitled to a refund?

It's all new to me, and I don't want to get in trouble with the HMRC but if my refund was owed or any is due then I want to make sure.

Many thanks
Jan

Archi_Bald

Not sure what is so urgent about this but all you need to know is available on the HMRC site:

http://www.hmrc.gov.uk/incometax/tax-free-interest.htm

http://www.hmrc.gov.uk/forms/r85.pdf
http://www.hmrc.gov.uk/helpsheets/r85-helpsheet.PDF

http://www.hmrc.gov.uk/forms/r40.pdf
http://www.hmrc.gov.uk/forms/r40notes.pdf

opinions4u

Interest paid in the summer of 2013 is for the current tax year 2013/14.

If you're a non-taxpayer for 2013/14 (see links in the post above) the refund is correct.

jancollins

opinions4u wrote: »

Interest paid in the summer of 2013 is for the current tax year 2013/14.

If you're a non-taxpayer for 2013/14 (see links in the post above) the refund is correct.

The Interest paid in the summer was earned over the year proceeding surely (Summer '12 - Summer '13). The refund seems more than the tax I would have paid on the interest earned from April of this year, to which 6 months of isn't even due to laid until next Summer (if that makes sense?)

From the links above, it also looks like I'll be due a reduced refund from the previous years where I earned little over the personal taxable income allowance, although it looks rather tricky to apply.

Thanks

eskbanker

jancollins wrote: »

The Interest paid in the summer was earned over the year proceeding surely (Summer '12 - Summer '13)

But if it's paid in summer 2013 then it's wholly associated with the 2013/14 tax year, regardless of when it was earned - it only becomes income at the point it's paid.

jancollins

eskbanker wrote: »

But if it's paid in summer 2013 then it's wholly associated with the 2013/14 tax year, regardless of when it was earned - it only becomes income at the point it's paid.

Yes, I'm aware of that (I think). My concern is if they have back dated the tax on my interest paid, as per the amount I didn't expect to receive, from last financial year when I was earning above the personal income allowance. It was only last week I informed my bank that I don't think I should be paying tax on my interest this year, no firm was filled in, and it looks as if the credit was issued that day.

xylophone

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

Have you seen this?

jancollins

Yes, looks complicated however. At least applying for back dated interest having earned just above the threshold (10%)

Milarky

jancollins wrote: »

On a separate note, over the past 2-3 years I've earned between £11-12k pa. I have always paid tax on my savings interest earned, is that correct or am I entitled to a refund?

A refund would only be due if the earnings were not above the personal allowance plus 10% band in any of those tax years, since otherwise the 10% band is non applicable and the 'correct' rate of tax to apply to savings interest was the 20% that was taken at source.

2011-12: 7475 + 2560 = 10035

2012-13: 8105 + 2710 = 10825

jancollins

Milarky wrote: »

A refund would only be due if the earnings were not above the personal allowance plus 10% band in any of those tax years, since otherwise the 10% band is non applicable and the 'correct' rate of tax to apply to savings interest was the 20% that was taken at source.

2011-12: 7475 + 2560 = 10035

2012-13: 8105 + 2710 = 10825

An, I earned 'just' above these figure in these years so I guess I was correct to pay tax. I'm still baffled however why I received so much back (from April to present I guess) when I told them recently that I shouldn't be paying tax during this tax year owing to very little earnings.

CLAPTON

facts always help