Tax on your savings
Are you paying more tax than needed on your savings? Why members aged over 65 should check carefully and may be in line for tax refunds
4 February 2013: While it’s right that we should all pay taxes where required it’s believed that millions of people are paying unnecessary tax on their savings. These are believed to be mostly people aged over 65 who are either unaware or haven’t bothered to complete some official forms which can take them out of paying tax on savings altogether, or reduce the amount of tax they’re paying and in some instances result in them getting a tax refund.
How it works
If you are aged over 65 in the tax year that began on 6 April 2012 and ends on 5 April 2013 you should not have to pay any tax on your savings interest if your annual income from all sources, including from any work, pensions, benefits, rental income and savings interest is less than £10,500. For people aged over 75 in the 2012/13 tax year it’s £10,660. So if you can identify yourself as not having to pay tax on your savings you should complete a R85 form and include details for each Nationwide savings account you hold and return it to us so that your savings interest can be paid without tax deducted. We cannot do this without R85 forms being completed as this is a requirement of Her Majesty’s Revenue and Customs (HMRC). Nationwide makes it easy for you to complete an R85 by publishing it online for you to download and print with a special helpsheet to assist you.
If you are over 65 and your income is above the limits for where no tax is due you may still be paying more tax than needed as you may not realise you qualify to pay a special 10% tax rate on your savings income. People can work out if they qualify for the special rate by adding all of their non-savings income. If you are over 65 and it is below £13,210, or if you’re over 75 and it is below £13,370, you should be able to reclaim some of the tax you have paid on your savings. In this case you must deal directly with HMRC, completing a R40 form, which can be downloaded from its website. Please note this form must then be returned to your tax office, not to Nationwide.
Where to learn more
Places to find out more online include the HMRC website and that of the Low Income Tax Reform Group
Recently the Daily Mail and its sister site thisismoney.co.uk have also highlighted the importance of knowing about savings tax and refunds. Check out what they have had to say in a series of articles to which we have supplied links below.
James Coney: A simpler tax system for elderly
10% Savings tax: Pensioners must claim back overpayments
10% Savings tax: Step-by-Step Guide