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Pensioners who have overpaid tax on the interest from savings could be eligible for a tax refund, explains Jane Frost, head of HM Revenue & Customs’ Individuals Customer Directorate.

Are You Paying Tax When You Don't Have To?

The economic downturn means that times are tough for many pensioners. At HM Revenue & Customs (HMRC) we are keen to make sure that people aren’t paying tax when they don’t need to. One significant group is pensioners, who may have overpaid tax on the interest from their savings.
 
We estimate that some 2.4 million older people could be paying more in tax than is necessary because they have not registered to have interest on their savings paid tax free.

Background

Banks and building societies are required by law to deduct 20% tax from the interest on everyone’s savings before it is paid. However, if you are a non tax payer, or if you qualify for the 10% savings rate, you may be due a repayment from us if interest on your savings has been taxed at 20%.

What’s more, if your income is below your tax-free allowance you can also register your savings accounts to get future interest payments made tax free. 

If you think you’ve overpaid tax in the past you can go to our website Do You Get Interest on a Bank or Building Society Account? and check to find out the time limits for claiming tax back.

Question -

I am over 65, I don’t pay taxes and I receive bank or building society interest after tax has been deducted - what do I need to do next?

Answer -

Visit Do You Get Interest on a Bank or Building Society Account? on our website which provides a repayment helpsheet  with a ‘calculator’ that will give you a rough figure that will help you to decide if you can make a claim for repayment of tax. If you do make a claim, we need to work out your tax exactly.
 
If you are due a tax repayment, claiming is easy and can be done using the HMRC Form R40 (PTB) which you can get from our website at Do You Get Interest on a Bank or Building Society Account?.

However, if you are receiving Pension Credit you will automatically receive a letter from us with a repayment helpsheet and Form R40 (PTB).

Can I Stop Tax Being Deducted from My Bank or Building Society Interest?

To stop tax being taken off your interest in future, complete form R85 which you can get from our website at Do You Get Interest on a Bank or Building Society Account?. You will need to complete one form for each bank and building society where you have savings and send it off to them (don’t send it to HMRC).   

For further help and advice you can visit Do You Get Interest on a Bank or Building Society Account?, or call the HMRC Taxback helpline on 0845 366 7850 (open 8.30am to 5.00pm Monday to Friday).