Help me save tax

jos22

I pay tax at the standard rate.

My wife currently earns approx. £4500 in interest which is paid gross as she has no other income. Next tax year she will recieve a pension of approx £3500. We both use our yearly ISA allowance.

Am I right in assuming that next year none of the interest can be paid tax free to offset the unused personal allowance?

jem16

No your pension income and savings income will be added together and the personal allowance taken off and tax paid on the rest.

The only problem is that your wife won't be able to register for gross interest any longer as she will be a taxpayer. The bank will deduct 20% tax on all of the interest and then you will have to claim a refund from HMRC at the end of the tax year.

Mikeyorks

jos22 wrote: »

Am I right in assuming that next year none of the interest can be paid tax free to offset the unused personal allowance?

You are right. If you're subject to any tax - you can no longer have an R85 in place on any account you own. So your wife needs to countermand any R85s that are in place - sometime after 6th April. But (the 10% band is retained for savings interest) she will be able to reclaim some of it - once she has the annual certificates of interest paid / tax deducted in Apr / May the following year.

jos22

Thanks to both of you.

I also assumed that the tax deducted, at source, on the interest paid could not be reclaimed from HMRC. As it appears it can full use of the personal allowance can be made so I am a little happier.

Again many thanks.