Bank and building society interest - Example 6

Lucas and Anthony are 15 year old twins. They both have savings accounts which pay them £500 a year. And both accounts are registered to receive interest without tax taken off because their yearly income is less than their income tax personal allowances - the interest is their only source of income.

Their 16th birthday is in June. The building society writes to them both telling them their interest will be paid with tax taken off in the future, and inviting them to complete a new form R85 if they are eligible to do so.

Lucas is planning to stay on at school and knows his total yearly income will continue to be less than his income tax personal allowance, so he signs a new form R85 and continues to receive his interest without tax taken off.

Anthony has started work and knows that his yearly income will be more than his income tax personal allowance. He does not complete a new form R85 and his interest is paid with tax taken off in the future.