Pensioner bonds

Buzzz

Not sure if this is the right place for this.

But looking at options to re-invest mum's £10k and have considered these.

Can you tell me whether as a 71 year old retired lady she is classed as a tax payer? Sorry, really have no clue

If she is either a non-taxpayer or tax payer, can she claim back interest paid as suggested in the guide on here?

Any other options on depositing £10k would be welcome, no access needed.

Buzzz

Typical, she's just text me as i've posted this to confirm she pays 20p in the £1 on earnings over £10,500, she earns £12,500 so pays tax on £2000.

So as per the guide, and the table in section 5, is she 20% tax? Sorry!

jimjames

Buzzz wrote: »

Can you tell me whether as a 71 year old retired lady she is classed as a tax payer? Sorry, really have no clue

Age has nothing to do with being a taxpayer or not.

You could be 90 and pay tax or 48 and not a taxpayer. It all depends on your income.

If you are a taxpayer then interest is currently taxable. If you've found the guide then that's probably a good place to start.

Buzzz

I have read the guide but still had the questions above as it wasn't clear to me (being a lesser financial mortal).

As i've just added to my post, she is a tax payer as she (wrongly) pays tax on her savings over a certain amount, but does that put her into the 20% taxpayer category and should she be able to claim this all back (I think the guide says this but am just checking).
Thanks

xylophone

See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293747/Fact_sheet_template_-_10__tax_9.pdf


http://taxaid.org.uk/wp-content/uploads/2010/10/savings-illustration-2015-16.pdf

http://www.thisismoney.co.uk/money/saving/article-2585084/Millions-benefit-axe-10-starting-rate-savings-interest.html

xylophone

See also calculator here http://www.hmrc.gov.uk/tools/r85/r85-2015.htm

teddysmum

The tax allowance is £10600 now but you can have up to £15600 tax free if total income is up to this amount.


You say that your mum's income is £12500, but whether she needs to pay tax depends on how much of this income is not from savings


1) If her pension is under £10600, this and the rest of the £12500 (made up with savings) is tax free and she can register to have no tax deducted at source from savings (but not in the case of 65+ bonds, as things stand; you have to claim tax back).


2) However , if her pension comes to over £10600, she will pay tax on the amount above this, but not on the part made up of savings.


eg Income £12500 made up of £11000 pension and £1500 savings.


She would pay tax on just £400 (£11000-£10600).

Buzzz

Great, thanks all very helpful

Eco_Miser

teddysmum wrote: »

She would pay tax on just £400 (£1100-£10600),but she would not be able to register for the savings to be not taxed at source, so she would be taxed on the savings and have to claim this back from HMRC.

She WOULD be able to register for the savings to be not taxed at source, if her total income is less than £15600.

Sparky47

Eco_Miser wrote: »

She WOULD be able to register for the savings to be not taxed at source, if her total income is less than £15600.

As this thread is about pensioner bonds, it should be noted that she could not register for gross income with NS&I as they do not operate the R85 scheme.

polymaff

Buzzz wrote: »

Great, thanks all very helpful

Some folk seem to be a bit confused about being a tax-payer and submitting an R85. Statements like

"The tax allowance is £10600 now but you can have up to £15600 tax free if total income is up to this amount."

are just not right.

To address these two issues for 2015/16 for folk with Buzzz Senior's profile:

1. Add up all of your expected gross (i.e. before tax is deducted) non-savings taxable income. This includes pensions, employment income, taxable benefits, rental income etc - but NOT dividend income.

Subtract your total personal allowance (£10,600 for the majority) from this figure. If the result is positive you will pay Income Tax on that amount.

2. Subtract the above result from £5,000. If this result is positive then a) this is the amount of gross, taxable, savings income on which you would pay 0% tax, and b) if your interest payer supports gross interest payment, then you can submit an R85.

Incidentally, it is your responsibility to re-assess any Gift Aid schemes you have signed up for in the light of your reduced tax liability. Also, having submitted R85(s), it is also your responsibilty to inform the interest payer(s) you've given R85(s) to of any changes to the above.

Personally, unless your affairs are very predictable, I'd think twice about R85. £10,000 invested at 2% would result in a basic rate deduction of £40 per annum. The loss of use of this £40, until it is refunded by HMRC, i.e. 2% of £40, is 80p per annum, gross. I'd happily pay 80p not to have to submit forms, keep banks updated and then wrangle with HMRC.

Let's hope that this year's Finance Act proposals are accepted - eliminating the need for R85.