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Claim to receive 'gross' interest from savings.

Discussion in 'ARCHIVE FORUM: Support discussions' started by CraigC, Jan 25, 2008.

  1. CraigC

    CraigC Registered User

    Mar 21, 2003
    6,630
    London
    #1 CraigC, Jan 25, 2008
    Last edited: Jan 25, 2008
    Has anyone persued a claim to receive 'gross' interest from savings for someone in care?

    Mums only income is a small pension, attendance allowance and mid range nursing fees. It seems daft for her to be taxed on savings.

    Also, does anyone know if this is based on he married couples income if they are in separate homes. Dad has a higher armed forces pension and is not entitled to the claim for gross interest from savings.

    I've started searching e.g.
    http://www.direct.gov.uk/en/Diol1/DoItOnline/DG_4017954
    http://www.hmrc.gov.uk/pensioners/claimingback.htm

    but it is so unclear where we stand.

    Though someone out there has been through the same process and may be able to help

    thanks
    Craig
     
  2. Grannie G

    Grannie G Volunteer Moderator

    Apr 3, 2006
    68,718
    Kent
    Dear Craig
    As far as I know you can receive Gross interest if you are not a taxpayer, meaning if your income, [I think] excluding interest falls below the tax threshold.
    Your mother can get tax free interest in an Instant ISA, interest is paid annually and she can draw from it if necessary.
    But she can only deposit a limited sum each year.
    I`m not sure of figures, they keep changing, but I hope this is of some help.
     
  3. CraigC

    CraigC Registered User

    Mar 21, 2003
    6,630
    London
    thanks sylvia.

    Mum is not a taxpayer but dad is, so not sure if it is related to married couples allowance. I'd ask a financial advisor but their fee would just about wipe out the benefits of applying. I've got an ISA for her already.
     
  4. Grannie G

    Grannie G Volunteer Moderator

    Apr 3, 2006
    68,718
    Kent
    Because Dhiren is older than I am he has a higher personal allowance. His pension is lower than this allowance so he is able to transfer the unused part of his allowance to me.

    Why don`t you contact the Inland Revenue, you will get advice from them free of charge.

    They are not as black as they`re painted these days. :)
     
  5. Brucie

    Brucie Registered User

    Jan 31, 2004
    12,413
    near London
    I thought you simply asked the bank or whatever to not deduct interest. Sign a form and they just do it.

    IR may ask at some stage and question things, but as long as things are above board I thought that was all there was to it.

    If their income doesn't go above the tax free allowance, IR never get involved.

    Am I being too simple-minded here?

    I simply asked for interest on Jan's accounts to be paid gross of tax. [she IS/WAS below the tax-free limit.]
     
  6. Grannie G

    Grannie G Volunteer Moderator

    Apr 3, 2006
    68,718
    Kent
    That`s fine Bruce, but Craig`s father could pay less tax if his mother`s unused allowance was transfered to him.
     
  7. Brucie

    Brucie Registered User

    Jan 31, 2004
    12,413
    near London
    :( always my problem. I never RTFM

    sorry..... didn't spot all the words in Craig's original message
     
  8. Grannie G

    Grannie G Volunteer Moderator

    Apr 3, 2006
    68,718
    Kent
  9. Nebiroth

    Nebiroth Registered User

    Aug 20, 2006
    3,518
    You can ask for interest to be paid gross (that is, without having tax deducted) if your taxable income is not above your personal allowance, in the current tax year.

    To do this you simply complete Forms R85 (you should be able to get this from most banks, building societies etc). You have to complete once form for each account (even if they are at the same bank). Basically you declare that your income will not be above the threshold, so you are entitled to gross interest. You hand this in at the bank who will then pay interest gross (and will keep doing so until you tell them otherwise). They pass the form on to the Inland Revenue, who keep a record of it and who may periodically check to ensure you are not making a false claim.

    Forms R85 contains a brief guide to help you work out your taxable income. If you're not sure, then pay a visit to your local Revenue office (they are now called HMRC - Her Majesty's Revenue and Customs) and they will help you. If you do this take along statements etc, that will help work out the income.

    You do NOT need to take into account Attendance Allowance, because that is not taxable. This means it does not contribute towards your income, as far as tax is concerned, and can be ignored.

    Many state benefits are taxable (state pension, for example, or Carer's Allowance), but Attendance Allowance is not.

    If you claim gross interest, and then your income rises and this potentially takes you above the threshold for the tax year, then you have to write to each bank asking them to deduct tax from interest.

    You cannot ask for interest payments to be backdated. If you think you've overpaid tax, then you can reclaim it, from the Revenue, using a "taxback" claim form.
     
  10. noelphobic

    noelphobic Registered User

    Feb 24, 2006
    3,452
    Liverpool
    you can claim back overpaid tax for up to six years also. If anyone has children who have savings accounts they should make sure that they also fill the form in so that the interest is paid gross, and claim back any money for previous years - might get round to doing this myself for my son one of these days! I think we filled the R85 in for one particular building society about 3 times and they kept losing it! It is much easier to not pay the tax in the first place than it is to claim it back after the event. It's not a complicated process, it just always ends up on the end of the 'to do list'! My son opened a new savings account a year or two ago and we filled the R85 in immediately so have had no problems.
     
  11. Nebiroth

    Nebiroth Registered User

    Aug 20, 2006
    3,518
    Indeed, however, if you are very close to the threshold or are not absolutely sure you don't need to pay tax, it's better to pay tax and reclaim it rather than not pay tax you should. This is because it's your responsibility to ensure you pay any tax you should and whilst reclaiming tax is a bit complicated, it's much easier than having to go to the Revenue and tell them you should have paid tax but didn't!
     
  12. noelphobic

    noelphobic Registered User

    Feb 24, 2006
    3,452
    Liverpool
    That's a very good point - if your income is borderline then it would make sense to wait until the end of the financial year before claiming any overpaid tax back, because at least then you can be sure that you have actually overpaid!

    Not directly related but I am presently paying the Working Families Tax Credit people back at the rate of £70 per month because I was overpaid! If they took into account all the money I lost because of the inefficiency of the CSA then I would be owed a lot of money from them!

    I think that people who are self funded and tax payers should get tax exemption on the proportion of their income that goes to pay their care home fees. After all, some business expenses are tax deductible. Care and nursing home residents are in many cases using their income to keep themselves alive and in as good health as is possible! They paid tax on their income while they were working, they are now paying tax on the interest on their savings, and having to pay for care or nursing home fees is another form of taxation in my opinion! Therefore they are being taxed three times over on the same money!

    I'll put my soapbox away now!
     
  13. jenniferpa

    jenniferpa Volunteer Moderator

    Jun 27, 2006
    39,419
    Hear Hear Brenda

    I always think about it like this: if you buy an annuity to pay care home bills, and the annuity pays directly to the care home, then the disbursements are tax-free, so why was my poor mother paying tax while at the same time spending down her saving to pay for care? Because that's the way the tax laws are written, that's why.
     
  14. Skye

    Skye Registered User

    Aug 29, 2006
    17,000
    SW Scotland
    What a good idea, Brenda!

    I'd certainly join that campaign!
     
  15. Margarita

    Margarita Registered User

    Feb 17, 2006
    10,824
    london
    #15 Margarita, Jan 26, 2008
    Last edited: Jan 26, 2008

    No one wonder Her majesty the Queen,gets so many perks on her Tax, its all her :D Or may be we paying for Her Majesty's Cope rights of using her Name .

    Sorry Only joking Just had to say that
     
  16. noelphobic

    noelphobic Registered User

    Feb 24, 2006
    3,452
    Liverpool
    So would I, but I would consider it more important, had I the time and energy, to campaign for free residential care for all with a serious medical condition such as dementia. I don't think my Mum does pay tax as her income is too low, but because she has a property she is still expected to pay for her own care.
     
  17. Clive

    Clive Registered User

    Nov 7, 2004
    716
    I agree with you Brenda. Ill people should not have to pay for their care.

    The sad thing about today’s system is that it is the ordinary middle of the road people who have their life’s savings confiscated.

    A person with a £30k a year pension (say like an MP) can pay the NH fees from income, leaving any money they have saved to be disposed of how they state in their will.

    A person with no savings has already spent their income as they wish anyway… and their NH is provided free of charge.

    It is only ordinary hard working people, who bought a small house and put a little money aside for a rainy day, who lose everything they worked for if they suffer from AD.

    (My parents saved by not smoking, drinking, going on holiday, or having central heating. They were still using the “Utility” blankets they got as wedding presents in 1940 when dad died!).

    Clive
     
  18. Margaret W

    Margaret W Registered User

    Apr 28, 2007
    3,725
    North Derbyshire
    Hi Craig C.

    If mum's total income from state pensions, other pensions, bank interest and anything else (ignoring attendance allowance) is less than £5,225 for the current tax year (6 April 2007 to 5 April 2008), then she should pay no tax for the year. If her savings have had tax deducted, two things you must do. One, fill in a form, the bank or building society should have them, to get tax removed from her interest payments, and Two if she has had tax deducted contact HMRC and get it refunded. It should take just a simple phone call to resolve. Also think about previous tax years, you can get refunds for the previous 6 tax years if tax has been deducted and it shouldn't have been.

    You do have to keep an eye on it, if things change in other years, and your mum becomes a taxpayer, you will need to notify HMRC if that happens.

    No-one needs to consult an IFA in this simple situation.

    If anybody needs basic tax advice, please email me. I am not allowed to say I am an expert, and I am not one, but I do have a lot of experience regarding tax, and I will ALWAYS say if I am not sure, I am just doing this as a favour to my buddies with the same problems as me.

    Love

    Margaret
     

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