Tax on interest

Legacy_user

I am a non tax payer but i would like to know how much am i allowed to earn in interest on my savings before i have to start paying tax?

I would also like to know, even though i dont get much interest on my savings at the moment, should i be filling in a tax return like tax payers do, and seeing as i dont get paper statements as its all done online, do i need 'paperwork' to back my accounts up?

Sorry if i am a bit dumb but i aint got a clue where tax is concerned and dont want to get into trouble later on down the line.

Dave_The_Rave_2

For the period April 2005 to April 2006 year, if you're single and not a pensioner, your personal allowance is £4895 per year. That means you can earn that before you start paying tax. Assuming you're getting less than this on your savings and other income, fill out an R85 form, to get the tax back straight away (otherwise the banks take it off before you get it). If you've been paying tax on your savings, you will need to fill in a tax return to reclaim the tax you've paid.

If you earning more than your personal allowance, you should be paying tax, and hence would NOT be a non-taxpayer.

It's always best to fill in a tax return (they're not too bad, and their helpline is good). By filling it in, you could find you're due alot of tax back ! But be honest with them (I made a legitimate error on one of the figures a few years ago, and it was spookily corrected by them !)

Bossyboots

You don't need to fill in a tax return to claim tax back, there is a different form. I did have a copy of one so I'll see if I can find it and let you know the number. I downloaded it from the Inland Revenue (as was) website so I'll look on their as well.

isasmurf

It's an R40 form. Available from https://www.claimyourtaxback.com

The R85 includes a helpsheet where you can enter your income and then check if the total is below your personal allowance. Also available from the above site.

exotic_2

Back in the 80's I paid too much income tax, but when I put in a claim for it not only did they pay it all back but they paid me a surprising amount of interest on top (can't remember the actual figures now, but interest rates in general were very high then).

I now find myself in the same position where I need to claim back income tax, and I'm wondering if I would be better off to leave making a claim for as long as possible. Does anyone know their current rate of interest?

Harvey's_Dad

exotic wrote:

Back in the 80's I paid too much income tax, but when I put in a claim for it not only did they pay it all back but they paid me a surprising amount of interest on top (can't remember the actual figures now, but interest rates in general were very high then).

I now find myself in the same position where I need to claim back income tax, and I'm wondering if I would be better off to leave making a claim for as long as possible. Does anyone know their current rate of interest?

Hi exotic; it looks like the interest rate that HMCE pay on income tax repayments (as from 6/9/04) is 3.5% as per the link below:

http://www.hmrc.gov.uk/rates/interest.htm

But, I seem to remember that this is tax free, for basic rate rate payers this would make this the equivalent of 4.4% or 5.8% for higher rate!

Whether or not this makes it worthwhile delaying your claim I don't know; isn't there a six year limit on how far back you can go?

telly-addict

The interest that the Inland Revenue pay you is indeed not taxable and is often called repayment supplement. For the tax year ended 5 April 2004, for example, the date of payment of any tax paid at source is deemed to be 31 January 2005 (always the 31 Jan following the end of the tax year). It is from this date of 'payment' that interest will start running from, until the date the repayment is issued.

The current rate is 3.5%. You have 6 years from the end of the relevant tax year to claim a repayment.

ctm_2

You would be better off getting your refund sooner and putting it ina savings account. Can't remember the exact figures, but the supplement paid is will always be a certain amount lower than the base rate, so a savings account will always pay more than HMRC will.