Tax on interest - low income

Emma1708

If someone's only income is £84 per month - should they get taxed on interest?

This is for someone who has received some back pay owing before they retired, but has been taxed on the interest on it. She is querying this as she believes that she does not earn enough to pay tax

I am not sure of the answer - if this is right then shouldnt she be reclaiming bank interest tax too?

Thanks

taxing-times

Hi Emma

If the income and interest is below the personal allowance, the person should apply to have their interest paid gross. They should fill in Form R85 and hand it into their bank.

If they have paid tax on their interest, and they are not a basic rate taxpayer (i.e. they have not exceeded their personal allowance AND the starting band - which still exists for savings) they will be able to reclaim some or all of the tax deducted.

Emma1708

Thank you for the information, thats very useful