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Getting Tax-Free Interest on Savings or Claiming Tax Back

If your income is low but you have managed over the years some savings and put it in a bank or a building society and being taxed for it, you can claim it back.

Getting Tax-Free Interest on Savings or Claiming Tax Back – Form R40

If the tax is levied on your interest, you can have your interest paid without any tax deduction.

Additionally, you can register to have the amount paid to back to you that were deducted as taxes.

Eligibility for Tax Free Interest

This is an important question the answer to which will let you know whether you the tax on your interest is valid or not.

Banks and building societies normally deduct 20 per cent tax from the interest they pay on most types of savings account.

However, under the circumstances that your taxable income is lower than your Personal Allowance (and any Blind Person's Allowance if you are getting it), you can do the following:

Register to ensure that your there are no taxes levied on the interest generated on your savings.

And if you have paid the taxes, you can make a claim for your money to be refunded.

Income that you receive for doing different types and forms of job is taxable.

However, the money that you receive from certain benefits and sundry other mentioned sources are exempted from tax deduction. It is important to note that your personal allowance refers to the amount of income that is tax free. It is dependent on various factors like your age, present circumstances, etc.

If the Income Tax paid by you is low

If your tax free income is only slightly more than your tax-free allowances, then under this circumstances all or some part of your interest generated from your savings will be taxed at ten per cent—the minimum tax on savings interest.

If you manage to fulfil the above mentioned criteria, then you are eligible to claim a portion of tax that has been levied on your interest. The amount that will be refunded is the difference between what have paid minus what is legally due to you.

How can I claim my Tax back?

If you believe that the tax charged on your interest exceeds that what you should have paid, you can claim it back by filling R40 Tax Repayment Form.

You need to fill the form for each year you think you have paid too much tax. For all intents and purposes, you will get back the excess amount that you have paid given that you fill and submit the form on time.

Time limit for reclaiming Tax

The time limit for getting the refund is shown in the following table. You must understand that failure to fill and submit the form within the stipulated time will lead to forfeiture of your refund.

Tax year you want to claim tax back Deadline for claims
SA taxpayers PAYE & other taxpayers
2007-08 5 April 2012
2008-09 5 April 2013
2009-10 5 April 2014
2010-11 5 April 2015
2011-12 5 April 2016
2012-13 5 April 2017
2013-14 5 April 2018
2014-15 5 April 2019
2015-16 5 April 2020
2016-17 5 April 2021
2017-18 5 April 2022
2018-19 5 April 2023

Circumstances under which you can use form R40 to ask for repayment

You are not within self assessment...I.e. you are not required to file your annual tax return.

You have paid more tax from your investments and savings than was actually due.

Under this situation, to claim a repayment you can:

  • Use the online service (sign into, or set up, a Government Gateway account). If you are filling it online, you will be provided a reference number through which you can track the progress of your form.
  • Print the postal form, fill it in by hand and post it to HM Revenue and Customs (HMRC)

You are a resident of the UK and pay taxes in the country.

It is important to note that HM Revenue and Customs (HMRC) refund the money through cheque. The check will be either mailed to you or you can request the cheque be sent to your appointed nominee. Alternatively, you can request the cheque be sent directly to your bank or Building Society.

Claiming on behalf of someone else

In case you are making a claim for refund for someone else( a person who is a minor or dead), you need to print the postal form, fill it in by hand and then post it to the HMRC with the residential address of the minor mentioned.

Things that you need at the time of filling the form:

  • Your National Insurance number (you’ll find this on your payslip, P60 or tax return)
  • Your agent’s details, if you have an agent who wishes to contact HMRC on your behalf details of income from:
    • UK employment
    • UK pensions
    • taxable state benefits
    • pensions and annuities
    • UK interest
    • UK dividends
    • trusts
    • UK land and property
    • foreign income
    • any other income
    • details of who wish the HMRC to issue the cheque

What needs to be done if circumstances change?

It is quite possible that your income and tax allowances change from time to time. It may be something else this year and different the next.

You may find that your income has gone above and beyond what your tax allowance could cover.

If such a situation arises, it is imperative that you let your bank or Building society about it without any delay so that they can start taxing your interest.

This is important in order to avoid tax bill at the end of the year.

For additional help and queries

If you need to find more information or have additional queries or concerns, you can always call the HMRC Savings Helpline on Tel 0845 980 0645, open from 8.30 to 5.00 pm Monday to Thursday and from 8.30 am to 4.30 pm on Friday (not including Bank Holidays).

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