Banks and building societies usually deduct 20 per cent tax from the interest they pay on most types of savings. However if you're on a low income and have savings, you can register to have the savings interest paid tax free and also claim back any tax that you have already paid.
To register to get interest on your savings tax-free you need to fill in form R85 (PDF 721K) and send it to your bank or building society. This applies if your total taxable income is less than your tax-free Personal Allowance.
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'. If this applies, you'll probably be able to claim the difference between the tax that was deducted and the amount that's actually due.
To do this you'll need to fill in a form R40 (PDF, 102KB) Tax Repayment Form. This form has to be done for each year you think you paid too much tax.
Your income and tax allowances can change from year to year - and during the year. So you may notice that 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. This way, you can avoid ending up with a tax bill at the end of the year.
To register to get interest on your savings tax-free you need to fill in form R85 (PDF 721K) and send it to your bank or building society. This applies if your total taxable income is less than your tax-free Personal Allowance.
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'. If this applies, you'll probably be able to claim the difference between the tax that was deducted and the amount that's actually due.
To do this you'll need to fill in a form R40 (PDF, 102KB) Tax Repayment Form. This form has to be done for each year you think you paid too much tax.
Your income and tax allowances can change from year to year - and during the year. So you may notice that 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. This way, you can avoid ending up with a tax bill at the end of the year.
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