Tax free savings?

jak

If I earn under the tax threshold for this year can all my savings be tax free?
I am going on mat. leave shortly and will 'earn' £5482.50 this year (includes a small amount of wages). Can I fill in a R85 form and not pay tax on any interest earnt?

10_66

As long as the interest earned from your savings added to whatever income you've earned this tax year doesn't take your income above the personal allowance limit, you can register an R85 for your savings. Have you got a cash ISA?

jak

Oh I see. Yes i've an isa- nothing in it as yet but should be able to save soon. What's the tax limit this year do you know?
Also does child benefit/child tax credit count as income do you know?

10_66

At the moment the personal allowance is £5435. If you contribute to a cash ISA, the interest earned is automatically tax free and doesn't have to be taken into account. You can contribute up to £3,600 into a cash ISA for the current tax year (sorry if this is something you already know).

I'm sorry, I don't know about whether or not child benefit/child tax credit count as income. HERE'S a link for the HMRC website, you should be able to find the answer on that, or else someone else will be able to answer on this thread.

Mikeyorks

jak wrote: »

Can I fill in a R85 form and not pay tax on any interest earnt?

Yes - if your total income (earnings + gross Interest) for 08-09 won't exceed £6035. (Not sure re the tax credit .. sorry)

The personal allowance you currently have is £5435. But the Chancellor announced the basic allowance will be increased by £600 just recently. That will backdate to 6.4.08 ...... although it's not showing on the key HMRC pages yet. But you can happily anticipate it with the R85 - provided you stay below £6035.

http://www.hmrc.gov.uk/employers/change-to-pa.htm

And don't forget there's a new 10% Savings Band. So if you do exceed £6035 ..... anything above that and up to £8355 (the 10% allowance is £2320) .... you can't file the R85 - but you can claim back the excess deducted at the year end.

jak

Fantastic thanks
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