When to cancel tax free status?

mrscruffy

Technically I'm no longer a student so I hope noone will mind me posting here :-)

After enjoying tax free status on all my accounts during my student years, I have no started down the long and winding career path.

My questionis, when should I cancel the tax free status on my accounts?
a) Now, because I expect to earn over £4,100 this tax year.
b) In a couple of months time, because that is when I will have been paid over £4,100.
c) Try to get away with it for as long as possible and expect a bill from the IR ;-) ?

Thanks for any help received

ps. For simplicity's sake I have estimated my personal tax allowance to be £4,100 - It may be higher/lower.

Savvy_Sue

For convenience, I'd do it now. But if you're prepared to sort it out later on in the year, you could leave it. As this is your first year of working post-student, you may well need to do a tax return after next April to make sure you haven't paid too much / too little tax anyway. Which would be an argument for not doing it now.

Although of course it also depends on the sums we're talking about. Are they worth hanging onto as long as possible? Or are they miniscule? Only you can decide ...

MarkyMarkD

Sue

You're not right. As soon as you become aware that your income in a tax year will exceed your personal allowance, you should cancel your R85 registrations and pay tax on your savings income.

There's no reason to have to do a tax return in your first year of working - your tax will come out right under PAYE as long as you have filled in the right forms on starting work, and provided any P45s relating to temporary/part-time work. The only thing leading to an under-payment would be precisely failing to revoke R85s as required.

Savvy_Sue

MarkyMarkD wrote:

Sue

You're not right. As soon as you become aware that your income in a tax year will exceed your personal allowance, you should cancel your R85 registrations and pay tax on your savings income.

There's no reason to have to do a tax return in your first year of working - your tax will come out right under PAYE as long as you have filled in the right forms on starting work, and provided any P45s relating to temporary/part-time work. The only thing leading to an under-payment would be precisely failing to revoke R85s as required.

Ah, that means I'm wrong then ...

Although for the final paragraph, there's a fair few 'ifs' in there. Having employed students who've not told me they're no longer available for work, it's been hard to keep track of who needs a P45 when. And I'm also thinking there might have been an overpayment of tax as well. It's not always bad news!

jimclark1967

MarkyMarkD wrote:

There's no reason to have to do a tax return in your first year of working - your tax will come out right under PAYE as long as you have filled in the right forms on starting work, and provided any P45s relating to temporary/part-time work. The only thing leading to an under-payment would be precisely failing to revoke R85s as required.

So what happens if your interest is paid monthly and you revoke the R85s in September (say) does the bank claw back the tax you should have paid on april-august interest as well as charging from now on?

If not then surely you'll have an underpayment whenever you cancel the R85 unless you did it on 6th April?

JC

reddevilled

jimclark1967 wrote:

So what happens if your interest is paid monthly and you revoke the R85s in September (say) does the bank claw back the tax you should have paid on april-august interest as well as charging from now on?

If not then surely you'll have an underpayment whenever you cancel the R85 unless you did it on 6th April?

JC

You're quite right. I would revoke the R85s now and then review your tax at the end of the year. If it is right or thereabouts, ignore it. If it's very wrong I'd contact the tax office.

Either way as soon as you expect to earn over the personal allowance in a tax year, you should revoke your R85s.

brains

I'm going to Uni next week, so does that mean that I can fill out an R85 tax exemption form and get all of my interest payed gross rather than net?

I have about £5K in an online saver too, as I've sold my car so I can afford to go to Uni. Could I get the interest payed tax free on that too?

I wasn't aware that students could fill out an R85 tax exemption.

HGLTsuperstar

I wasn't aware that students could fill out an R85 tax exemption.[/QUOTE]

Oh you need to wise up. You're a student, you should never willingly pay full price for anything. Yes fill out the R85 but also look for discounts, and flash your NUS card anywhere, if you dont ask you dont get!

brains

HGLTsuperstar wrote:

I wasn't aware that students could fill out an R85 tax exemption.

Oh you need to wise up. You're a student, you should never willingly pay full price for anything. Yes fill out the R85 but also look for discounts, and flash your NUS card anywhere, if you dont ask you dont get![/QUOTE]

The bank that I have the internet based savings accounts says it's not available to students though. So if I started getting interest paid Gross, do you not think they would click on? My actual current account and internet saver is with one bank, and I have opened a total seperate student account with interest free O/D etc.

Also what happens If I've worked since April and have earned around £5k, does that mean I've earned over the threshold and therefore can't receive interest Gross.

jimclark1967

brains wrote:

Also what happens If I've worked since April and have earned around £5k, does that mean I've earned over the threshold and therefore can't receive interest Gross.

Yes, if you've already earnt more than the personal allowance you can't receive interest gross in 05/06 tax year. If that's likely to change next year you can register from April 6th.

brains wrote:

The bank that I have the internet based savings accounts says it's not available to students though. So if I started getting interest paid Gross, do you not think they would click on? My actual current account and internet saver is with one bank, and I have opened a total seperate student account with interest free O/D etc.

What's not available to students? The account? Gross interest?

JC

brains

jimclark1967 wrote:

Yes, if you've already earnt more than the personal allowance you can't receive interest gross in 05/06 tax year. If that's likely to change next year you can register from April 6th.


What's not available to students? The account? Gross interest?

JC

Cheers for the help mate. The online saver account is not available to students. Presumably because then you can do what I'm gona do, get a £2k interest free O/D and stick it in an online saver.