Bank and building society interest

Transcription

1 Bank and building society interest Are you paying tax when you don t need to? IR111

2 Contents Tax free income 1 How to get your interest without tax taken off 1 Can you get your interest tax free? 1 People living abroad 1 How to claim tax back 2 No tax to pay? 2 Some tax to pay? 2 Claiming tax back for earlier years 2 Claiming tax back already taken off your interest 2 Claiming tax back for someone else 2 Other things you may need to know 3 Children under 16 3 Gifts of money to children 3 Children aged 16 and over 3 Joint accounts 3 Increases in income 4 Account holder dies 4 Any questions? 5 Customers with particular needs 5 Case Studies 6 Helping someone to get their interest tax free and to claim tax back 6 Children over 16 and students 6 Tax Credits and interest without tax taken off 6 Helpsheet for Form R85 (2004 New) 7 10 We have a full range of services for people with disabilities, including leaflets in Braille, audio and large print. For details, please ask your local Inland Revenue office or Enquiry Centre. Getting your interest without tax taken off (Form R85)

3 Are you paying tax when you don t need to? Young or old, grandchild or grandparent, everyone who lives in the UK is entitled to some tax-free income. Tax free income Do you have a friend or relative paying tax on their bank or building society interest when they may not need to? Parents are your children paying tax when they don t have to? Can you get your interest tax-free? Having some tax free income means that you may not have to have tax taken off your interest by your bank or building society, and if your bank or building society has taken tax off, you might be able to get some tax back. How to get your interest without tax taken off Your bank or building society will usually take tax off your interest. But how much tax you pay depends on how much income you get and how much you are entitled to get tax free. Please follow the Helpsheet for Form R85(2004 New) on pages 7-10 to see if you should have tax taken off your bank or building society interest. If you work out that you can get your interest tax-free, please complete the form Getting your interest without tax taken off (R85) at the end of this leaflet. People living abroad This leaflet is only for people living in the UK. If you live abroad and would like information about tax on bank and building society interest, please go to phone if calling in the UK phone UK if calling from outside the UK. 1

4 How to claim tax back No tax to pay? Some tax to pay? If you have used the Helpsheet on pages 7-10 to work out that you should not pay tax, and your account is already open, you can claim back the tax taken off your interest. The bank or building society takes tax off your interest at a rate of 20%. However, if you pay tax on less than 2,020 of your income then you are only due to pay tax at the starting rate of 10%. You can claim back the tax taken off your interest that is more than you need to pay. Claiming tax back for earlier years Claim by 31 January 2005 and you can go back as far as the tax year Claiming tax back already taken off your interest To claim tax back you have to make a repayment claim. To find out how to claim go to call our Taxback Helpline on , or visit any Inland Revenue Enquiry Centre and ask for the form Claim for Repayment (R40). The address is in your local phone book under Inland Revenue. Claiming tax back for someone else You can claim tax back on behalf of someone else if you are the parent of a child (under 16 in Scotland or under 18 in England, Wales and Northern Ireland) the next of kin of someone who is incapable of managing their own affairs, or a relative of someone who would have difficulty in making a claim, such as someone in poor health. Others, who have an official status, such as a guardian or someone appointed by the courts, can also claim. If you are thinking of claiming tax back for someone else please call our Helpline on for details about what to do next. 2

5 Other things you may need to know Children under 16 A note for parents. Your child is entitled to tax-free income in his or her own right. So he or she may not need to pay tax on interest. Please use the Helpsheet on pages 7-10 to see if this applies to your child. If it does, you should fill in and sign the form Getting your interest without tax taken off (R85) at the back of this leaflet. Then hand it in to the bank or building society. You should also think about claiming tax back. Gifts of money to children You cannot fill in a form Getting your interest without tax taken off (R85) for a child s account where the account includes money that was a gift from you, for example, a birthday present, and all your gifts to the child produce more than 100 interest (before tax) in a tax year. Neither can your child claim any tax back. For more details and advice on gifts to children call our Helpline on Children aged 16 and over The form Getting your interest without tax taken off (R85) is the authority for the bank or building society to pay interest tax-free. But this authority will expire on 5 April following the child s 16th birthday. However, a child can complete a form in his or her own right at any time from 6 April in the tax year that includes their 16th birthday. Joint accounts If all the account holders are entitled to tax-free interest they should each complete their own form Getting your interest without tax taken off (R85), and hand it in to their bank or building society. Where the account holders are not all entitled to tax-free interest, some banks and building societies will let you split account holders into those who get interest tax-free and those who don t. 3

6 If your bank or building society allows this, you should complete the form Getting your interest without tax taken off (R85) at the end of this leaflet and give it to your bank or building society. If your bank or building society will not accept a form, you should claim tax back on your share of the interest directly from the Inland Revenue. For more details and advice on joint accounts call our Helpline on Increases in income A note for people who have given their bank or building society a form Getting your interest without tax taken off (R85). Any increases in your income could mean that you are no longer entitled to get your interest without tax taken off. So please use the Helpsheet on pages 7-10 to check the position again if, for example, you inherit money start a new job get a new pension. If your income increases on or after 6 April 2005, call our Helpline on and ask for a new Helpsheet. Account holder dies If an account holder dies, any interest paid before the date of death belongs to them. The executor or administrator should contact the deceased person s Inland Revenue office to arrange any tax back claim. Interest paid after the date of death belongs to the estate. Even if the person who died was getting interest without tax taken off this cannot apply to the estate. The executor or administrator must tell the bank or building society of the death. Tax will then be taken off any interest paid until the estate has been settled. 4

7 Any questions? This leaflet does not cover all the details about tax on bank and building society interest. If you have any questions about getting your interest tax-free please call our Helpline on (local rates) claiming tax back on your interest please call our Taxback Helpline on (local rates). Or you can visit any Inland Revenue Enquiry Centre. The address is in your local phone book under Inland Revenue. Customers with particular needs We offer a range of facilities for customers with particular needs. For complete details please visit or look in the Phone Book under Inland Revenue for your local Inland Revenue Enquiry Centre and our contact numbers. Some of the things we provide are wheelchair access to nearly all Inland Revenue Enquiry Centres, please call ahead to check home visits, if you cannot get to one of our Enquiry Centres leaflets in large print, Braille and audio for people with hearing difficulties BT s Typetalk induction loops sign language interpretation help with filling in forms foreign language interpreters. 5

8 Case studies Helping someone to get their interest tax-free and to claim tax back See page 2 for details. Anna is 86 years old. She receives state pension of 120 a week and interest of about 80 a year on her savings. Because Anna s income is less than her tax free income she is not a taxpayer, but because she did not know she could receive interest without tax taken off she has never completed a form Getting your interest without tax taken off (R85) and given it to her building society. This means she has paid tax on the interest she received. The building society interest Anna should have received is 100 but the building society took off 20 in tax and paid it to the Inland Revenue. Anna s home help realised Anna should not be paying tax and rang the R85 Helpline to request a large print version of the form. The Helpline also suggested Anna might be able to claim tax back for the past 6 years and sent Anna large print versions of the claim form R40. Anna, with her home help s assistance, completed the forms and claimed back 140. Children over 16 and students See page 3 for details. Toby is 22 and training to become a nurse. He receives a bursary and earns about 50 a week working in a restaurant. The bursary is tax-free and is paid directly into his building society account. Toby receives about 100 a year in interest from this money being in his account. Because his total taxable income is about 2,700 a year Toby has completed a form Getting your interest without tax taken off (R85) and given it to his building society. If he hadn t done this, he would have only received 80 a year in interest. Tax Credits and interest without tax taken off See page 9 for details. Lisa is married with two young children. She earns about 40 a week working in a nursing home. She also receives Child Tax Credit and Child Benefit, which are both paid directly into a bank account in her name. The interest on this bank account is about 50 a year and it doesn t have any tax taken off because Lisa completed a form Getting your interest without tax taken off (R85) and gave it to her bank. Lisa knew she could do this because neither Child Tax Credit nor Child Benefit are taxable and her earnings and interest add up to about 2,130 a year, which is less than her tax-free amount. 6

9 Helpsheet for Form R85(2004 New) The law allows everyone who lives in the UK to receive some income, at least 91 a week, before tax has to be paid. If your income is below that limit and you ve got some money in a bank or building society you will be paying tax on your interest, when you don t have to. If you live in the UK, use the notes on pages 8-10 to see if you should be filling in the form Getting your interest without tax taken off (R85). If you need help, please phone the Helpline on People living abroad web address and phone numbers are on page 1. If you don t live in the UK, year on year, please phone the Helpline. If you call from the UK, calls are charged at local rates. Please don t ask your bank or building society for advice it s the Inland Revenue s job to help you fill in this Helpsheet, not theirs. 7

10 Helpsheet continued Helpline (local rates). First, pick your age from the table below and see how much income you can have a year, or a week, without paying tax. If you look after an account for someone else, say for a child under 16 (a saver under 16 cannot sign the form) or someone who can t manage their own money themselves, use their details. Tax free income Your age by 5 April 2005 Annual limit Weekly limit Under to over From the table above, enter your annual tax free income in box 1. Box 1 2 If you are a married man and you or your wife were born before 6 April 1935, enter 3735 in box 2. If you are a married woman and either of you were born before 6 April 1935 and your husband has less income than you please phone the Helpline. Box 2 3 If you are registered blind with your local authority enter 1560 in box 3. If you live in Scotland or Northern Ireland your local authority may not keep a register, if they do not please phone the Helpline. And if you are married and your husband or wife is registered blind and has less income than you, please phone the Helpline. Box 3 4 Add up boxes 1,2 and 3 and put the total tax free income in box 4. Box 4 8

11 Helpsheet continued Helpline (local rates). Next, work out your annual income. If you need help with what counts as income, ring the Helpline. If you want to check if your National Savings and Investments income should be included, either ring the Helpline or go to State pension the weekly entitlement x 52 (Do not include any Pension Credit) Other pensions, for example, from a previous employer Pay from employment, or profits from working for yourself Jobseeker s allowance and taxable incapacity benefit. (Do not include Working Tax Credit, Child Tax Credit, or social security benefits such as Child Benefit or Attendance Allowance) Interest from banks and building societies include the amount before tax was taken off (the gross amount). If you have a joint account just include your share. (Do not include any ISA interest) Company dividends and any other income you think may be taxable, for example, rents you receive. (Do not include Student Loans) Total Box 5 Now, is the figure in box 5 less than the figure in box 4? Yes No 9

12 Helpsheet continued Helpline (local rates). If Yes you should complete the form Getting your interest without tax taken off (R85). Your interest will then be paid to you without tax being taken off it first. Keep this Helpsheet for your records. Do not give it to the bank or building society with your completed form R85. If No please do not fill in the form. If you do fill in the form, then you are telling your bank or building society that you don t have to pay tax. It s not the bank or building society s responsibility to check this (but the Inland Revenue may, at a later date). For new accounts you will need to fill in a new form R85. If your income goes up, so you should start paying tax, please tell each of your banks or building societies. Your bank or building society may be able to repay any tax they have already taken off your interest in this tax year (from 6 April 2004 to 5 April 2005). If you have paid tax on your interest in the past, but now think perhaps you should not have done, please ring the Helpline or look under Inland Revenue in the phone book to find your nearest Inland Revenue Enquiry Centre, or go to to see if you can get some tax back. If you have difficulties signing or making a mark on the form R85, please call our Helpline on The Helpsheet and form R85 are available in large print and Braille please call our Helpline. 10

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16 These notes are for guidance only and reflect the position at the time of writing. They do not affect any right of appeal. Issued by Inland Revenue Marketing and Communications July 2004 Crown Copyright 2004 Printed by The Astron Group 07/04 NSV Code R2P 3332