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If you're on a low income and have savings with a bank or building society you could be paying tax on your interest when you don't need to. If this is the case, you can register to have the interest paid tax-free. You can also claim a refund of any tax you've overpaid.
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Banks and building societies usually deduct 20 per cent tax from the interest they pay on most types of savings account. But if your total taxable income is less than your tax-free Personal Allowance (and any Blind Person's Allowance if you receive this) then you can:
Taxable income includes money you earn from a job. But it excludes money you get from certain benefits and some other sources. Your Personal Allowance is the amount of income you can get tax-free and depends on your age and circumstances.
If your taxable income is only slightly higher than your tax-free allowance(s) then some or all of your savings interest may be taxable at 10 per cent - the 'starting rate for savings'. You can find out more about this by following the link below.
If this applies to you, you'll probably be able to claim some tax back if it's been deducted from your interest. The amount you can reclaim is the difference between the tax that was deducted and the amount that's actually due.
To register to get interest on your savings tax-free you need to fill in form R85 Getting your interest without tax taken off and send it to your bank or building society. Some banks and building societies also let you register by phone.
You'll have to fill in a separate form R85 for each bank or building society where you've got accounts. If you open a new account you'll need to check your income and allowances and fill in a new form.
If you're under 16, your parent or guardian will have to register for you. Once you turn 16 you'll have to complete a fresh R85 - and sign it yourself - if it's appropriate for you to continue getting your interest paid without tax taken off.
You can check if you can get your interest tax-free by filling in the table in the helpsheet that comes with form R85. Or you can use the HMRC simple online checker.
If you think you've paid too much tax on your interest you can claim it back. To do this you'll need to fill in a form R40 Tax Repayment Form. You'll have to do this for each year you think you paid too much tax.
In most cases you'll get back the tax you've overpaid as long as you claim on time.
The time limits for claiming a refund are shown in the table below. If you don't make a claim within the time limit you'll miss out on any refund due.
|Tax year||Tax year ended on||You must claim by:|
|2009-10||5 April 2010||5 April 2014|
|2010-11||5 April 2011||5 April 2015|
|2011-12||5 April 2012||5 April 2016|
|2012-13||5 April 2013||5 April 2017|
Your income and tax allowances can change from year to year - and during the year. So you may find your income goes up and your tax allowances no longer cover it.
If this happens it's important you tell your bank or building society straight away so they can start taking tax off your interest. Otherwise you may have a tax bill at the end of the year.
If you need any help getting tax-free interest you can call the HMRC Savings Helpline on Tel 0300 200 3312, open from 8.00 to 8.00 pm Monday to Friday and from 8.00 am to 4.00 pm on Saturday (not including Bank Holidays).