Bank Account Interest Tax

Bank Account Interest Tax

According to a recent survey, almost 99% of people in the UK have at least a current account.  Over 60% of people have a deposit account with savings for a rainy day.

With the introduction of interest on current accounts and more people opting to put their money in the bank or building society, the question of tax raises its head again.

Many people do not know that their bank and building society accounts will have tax deducted from interest, unless they ask for it not to be taken.

If you pay tax on your earnings, savings or pensions then 20% of any interest will be deducted by your bank or building society and passed to the Inland Revenue.  That’s 20p in each £1 and you just get the balance.  If you do not pay tax, you should ask for interest to be paid without tax being deducted.

Currently, if your total income falls below the following figures, depending on your age, you probably should not be having tax deducted from your accounts:

Up to age 65 - £7,475
65 to 74 - £9,940
75 or over - £10,090

If you should not be paying tax, contact your bank or building society for an R85 form.  This is a short form that tells the Inland Revenue that tax should not be deducted from interest.  You just need to fill it in and return it to your bank or building society.

If you think you have overpaid tax you should contact your local tax office and ask them to send you an R40 tax reclaim form.  You might be entitled to a refund!

If you wish to know more about Interest Tax.  Contact Us.