The poorest could be saving £200m in tax...

Enable Independent, IFA’s in Bishop’s Stortford were disappointed to read the recent stats which show that some of the poorest people in the UK could be saving approximately £200m per year on tax.

The research was completed by the Low Income Tax Reform Group (LITRG) who have stated that only 1 in 10 banks and building socities have informed their customers of ways in which they can have interest-free tax savings, if they earn under the capped amount, listed below.

Here is a summary of how much you can receive before paying tax in your account:

• If you are aged 65 or less (this includes children) you can receive up to £8,105 in the tax year ending on April 5, 2013, without having to pay tax.

• If you are aged 65 but less than 75 you can receive up to £10,500, in the tax year ending on April 5, 2013, without having to pay tax.

• If you are aged 75 or over you have a personal allowance of £10,660.

If you have money in the bank you receive interest on it then the bank or building society will normally pass on the tax to HMRC. However if you feel as though you should not be paying tax on the interest you can apply to have their savings paid to them in gross, so that will not have any tax deducted – using an R85 form. You can download your R85 form here www.hmrc.gov.uk/forms/r85.pdf

Many people don’t realise you can claim the tax back, so loose out on claiming the money back. If you haven’t claimed yours back then don’t worry as you have four years where you can claim back from this tax year. 

Anthony Thomas, chairman of the LITRG, said: “Millions of people are overpaying income tax because they are incorrectly paying tax on their bank and building society interest. These are some of the poorest people in the country, with incomes below the income tax threshold.

“HMRC, banks and building societies all need to do more to publicise the form R85 procedure and when it is appropriate for an individual to apply for their interest to be paid gross.

“HMRC should be more proactive in obtaining information about interest payments from financial institutions, enabling them to reconcile data to individuals’ tax records and automatically issue repayments where appropriate. Now is the ideal time to be considering this, facilitated by improvements in technology.”

If you would like help to make sure you are getting the most out of your savings then why not contact your local professional Independent Financial Advisors, Enable on 01279 755950.