Do I qualify for gross interest??

capehorn

Hi

I'm sitting here trying to work out whether I'm allowed to fill out and send off a R85 form.

I earn £415 a month (just under £5k a year), but with a bit of overtime, I will go very near to my tax allowance of £5225, and as I am expecting a couple of hundred pounds in interest, I suspect that I am not entitled to gross interest on my savings.

However, I pay £300 of my annual wages into a pension scheme, and I thought I'd read somewhere that money paid into a pension isn't taxable at the time, and therefore I would qualify for gross interest.

Could someone clarify this for me??

Thanks

gt94sss2

It sounds as if the total of your income + interest on savings may take you over your annual allowance, so you will not be able to register for gross interest on your savings.

Instead, you will probably have to fill in a R40 Tax Return each year and the Inland Revenue will then refund any overpaid tax on your savings/pension payments etc. (check its the right form for you with your tax office)

Regards
Sunil

jem16

capehorn wrote: »

However, I pay £300 of my annual wages into a pension scheme, and I thought I'd read somewhere that money paid into a pension isn't taxable at the time, and therefore I would qualify for gross interest.

Could someone clarify this for me??

Thanks

I think the answer may depend on how your pension payments are paid. If they are paid before tax is taken off then your taxable income is lower by the amount that goes into your pension so IMO you would qualify if that taxable income plus savings is below £5225. Remember you have to include gross interest in that.

If your penison payments are paid after tax then no you would not qualify.

capehorn

jem16 wrote: »

I think the answer may depend on how your pension payments are paid. If they are paid before tax is taken off then your taxable income is lower by the amount that goes into your pension so IMO you would qualify if that taxable income plus savings is below £5225. Remember you have to include gross interest in that.

If your penison payments are paid after tax then no you would not qualify.

Do you know how I would find this out? On my wages slip, under taxable payments is my total earnings for that month. Then under deductions, by pension is taken out, then under net pay is my take home.

Does this help?

jem16

If it's a company pension and the pension is taken from your wage slip, it is likely that it was before tax.

However best bet is to check your tax year accumulations. If your total taxable pay for the year (3 months so far) is less than adding up each month's basic pay then your pension is paid before tax.

InMyDreams

capehorn wrote: »

Do you know how I would find this out? On my wages slip, under taxable payments is my total earnings for that month. Then under deductions, by pension is taken out, then under net pay is my take home.

Does this help?

How long have you been working? Look on your P60. That will give you your 'pay for tax purposes' which is the figure you'll need to be using since your pension comes out of your payslip. Is your pay for 07-08 likely to be about the same as for 06-07? Then of course add on what you expect to get from interest and any other taxable incomes.

I'm not sure (so would be interested to find out myself as I expect to be in a similar position in a year or two) if there are any repercussions if you fill in the R85 and then find out afterwards that you should indeed have paid tax. I fill in a self assessment every year anyway and I'm just keeping things how they are until such a year that I do go over. I assume I'll then just have to pay the tax owing for that year and then inform my banks if I suspect it to be the same the following year too. There's not going to be any penalty is there? All I'll end up paying is the tax I owe anyway? Right?

debbie42

InMyDreams wrote: »

I'm not sure (so would be interested to find out myself as I expect to be in a similar position in a year or two) if there are any repercussions if you fill in the R85 and then find out afterwards that you should indeed have paid tax. I fill in a self assessment every year anyway and I'm just keeping things how they are until such a year that I do go over. I assume I'll then just have to pay the tax owing for that year and then inform my banks if I suspect it to be the same the following year too. There's not going to be any penalty is there? All I'll end up paying is the tax I owe anyway? Right?

On the R85 guidelines, I think it says that if your circumstances change, and you aren't below the income threshold, then you should advise the bank of this. I don't see how you can be penalised if your circumstances changed from when you first filled it out, as long as you keep them informed.

capehorn

Thanks for all the replys.

Unfortunately my P60 won't help because I only signed up for the pension scheme in May (I work in a school, it's a LGPS)

But I think I may have found the answer to my question...

In April I was paid £404.
In May I was paid £426 with £25 put into my pension.

At the bottom of June's payslip, my total taxable pay to date is only £805, suggesting that my pension contributions are not taxable pay. The same thing has happened on my June payslip, the pension amount I paid is not included in the taxable pay total.

So is that the definitive answer, that my pension contributions aren't taxable??

Thanks

Primrose

As regards the £200 in interest you expect to receive, I I suggest you put your savings in a Cash ISA. Interest from this source is tax free and you don't have to declare it to the tax man.

capehorn

Primrose wrote: »

As regards the £200 in interest you expect to receive, I I suggest you put your savings in a Cash ISA. Interest from this source is tax free and you don't have to declare it to the tax man.

The majority of it is from a regular saver. The rest is in an ISA

jem16

capehorn wrote: »

Thanks for all the replys.

Unfortunately my P60 won't help because I only signed up for the pension scheme in May (I work in a school, it's a LGPS)

But I think I may have found the answer to my question...

In April I was paid £404.
In May I was paid £426 with £25 put into my pension.

At the bottom of June's payslip, my total taxable pay to date is only £805, suggesting that my pension contributions are not taxable pay. The same thing has happened on my June payslip, the pension amount I paid is not included in the taxable pay total.

So is that the definitive answer, that my pension contributions aren't taxable??

Thanks

The LGPS takes your contribution before you are taxed so yes your taxable income is reduced by that amount.