Bank and building society interest - Example 2
Annette is 17 and still at school. She works in her father’s printing business on Saturdays and during school holidays, earning £5225 a year.
She also receives interest from her savings account - £20 a year. But tax of £4 has been taken off the interest, so Annette only receives £16. The bank pays the tax of £4 to HM Revenue & Customs.
But, even though Annette has used up all of her income tax personal allowance of £5225 for the current tax year (2007-2008), she is still paying too much tax because she has paid tax at 20% but hasn’t used her 10% tax rate band (the first £2230 of income).
Because Annette’s total income is more than her allowances she cannot complete form R85 and must continue to receive her interest with tax taken off. However, Annette can claim back the overpaid tax from HM Revenue & Customs.
Annette’s tax calculation for the 2007-2008 year looks like this
|
Gross |
Tax |
|---|---|---|
Earnings |
£5225 |
£0 |
Interest |
£20 |
£4 |
Total |
£5245 |
£4 |
Less allowance |
£5225 |
|
Taxable income £20 x 10% = £2 tax due
Less tax already deducted £2
Repayment due £2
