Tax implications?

reggie

We have some savings in my name as I haven't been working for the past year - so we filled in the relevant form to get tax free interest. I have recently started doing some supply work, where I believe I get taxed at source. As this payment will take me over my tax free threshold I'm not sure whether I have to inform the building society or what. The work I'm doing only amounts to £100 or so every now and again - I may not get any more work for several months or more. Would welcome any advice.

fengirl_2

If your earnings take you over the tax free limit (5225), then you need to deregister.
You say that tax will be deducted at source from your teaching - make sure that your tax free allowances are given against this and that you dont have BR tax deducted.

reggie

Thanks for your reply.
Is the interest I earn tax free counted as earnings? - that has gone slightly over £5225 As I said the most I will have earned from working this tax year will be less than £500. I did send my P45 to the council who I do supply for. Should I ring up the council to see what tax code I'm on?

fengirl_2

Your interest is income for tax purposes and counts against the 5225 exemption.
Did you not retain the P45 part 1a before you sent your P45 to the council?
I think you should deregister your account anyway if your interest has exceeded your tax free amount.

reggie

Just got off the phone - P45 was an old one, so I've got to fill in P46. The tax people said to wait until I know how much I've gone over the limit (ie end of March) and tel them with details and they'll assess then. So is it worth deregistering only to have to register again for April?

Mikeyorks

reggie wrote: »

The tax people said to wait until I know how much I've gone over the limit (ie end of March) and tel them with details and they'll assess then. So is it worth deregistering only to have to register again for April?

Fengirl was quite right in what she said to you. But, with the end of the tax year in sight, HMRC (they'll probably send you a P810 after April) are being a bit pragmatic .. for a nice change.

Based on what they've said .. don't withdraw your R85 now .. as some Banks will apply that retrospectively to any gross payment since Apr 07. But wait and re-assess your position after 6th April against your new allowance for 08-09 .. which is £5435. If your income plus gross interest exceeds that then you should withdraw the R85 then.

Bear in mind that if you do go over the £5435 next year .. the 10% tax band is retained (detail still sketchy - hopefully elaborated 12th March, with the Budget) if the excess is savings interest .. at least up to £2k. So you should be able to reclaim half of the 20% your Bank / BS will deduct at source.

reggie

Thanks for all your really helpful replies. I think for next year, which is looking similar to this year, it could well be worth reducing the balance in my existing account so as to ensure I don't go over the tax free amount allowed..again thanks for clearing the muddy waters!
If I do this, will the tax I pay on any supply work be linked with my interest earned and so be taxed accordingly?

oramgepekoe

Have you got a cash ISA as they're tax-free? If not, open one before the end of the tax year and put up to £3000 in there and then another in the new tax year.

reggie

Yes, got a cash isa and will put another £3000 in from 1st April which should help with the situation for next year somewhat.

CLAPTON

reggie wrote: »

Yes, got a cash isa and will put another £3000 in from 1st April which should help with the situation for next year somewhat.

the relevant date is the 6th april and the new limit is £3,600