Annette is 17 and still at school. She works in her father’s printing business on Saturdays and during school holidays, earning £7,475 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 (HMRC). But,
even though Annette has used up all of her Income Tax personal allowance of
£7,475 for the current tax year (2011-12), she is still paying too much
tax because she has paid tax at 20 per cent but can use the special ‘savings
rate’ tax band. 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
HMRC.
|
Gross |
Tax |
|---|---|---|
Earnings |
£7,475 |
£0 |
Interest |
£20 |
£4 |
Total |
£7,495 |
£4 |
Less allowance |
£7,475 |
|
Taxable income £20 x 10% = £2 tax due
Less tax already deducted £2
Repayment due £2
