Taxpayers urged to check P60s to avoid overpaying tax
8th June 2016 | News
Taxpayers have been urged to double-check their P60s in order to avoid overpaying on their taxes. A raft of changes to legislation on personal savings have seen both banks and building societies paying interest without making tax deductions at source.
Claims can be made for four years in arrears, so it’s worth taxpayers checking whether they’ve had any money deducted from their savings income.
The old rules, which ran up until 6 April 2016, made it compulsory for banks and building societies to deduct 20 per cent basic rate tax from any interest paid to accounts. The only exception to the rule came if the individual was a non-taxpayer and registered to have their interest paid gross.
As a result, some people who had tax deducted from their interest may be eligible to claim either some or all of it back.
An individual who owed some income tax, but whose total tax bill added up to less than the amount deducted by their bank or building society, would be a prime candidate. In this situation, they would be to claim back the difference and wouldn’t end up paying any income tax at all.
It’s also possible that some of the interest might have fallen within the starting rate for savings: if this was the case, then they would have owed 10 per cent tax before 5 April 2015, but 0% thereafter.
Banks and building societies are no longer legally required to deduct the basic tax rate from most interest payments and this has been the case since 6 April 2016.
Basic rate taxpayers are now allowed a tax-free savings income of £1000, and if their total taxable income falls below £17,000 per year, they are not required to pay any tax on savings income.
Anthony Thomas, chairman, Low Income Tax Reform Group (LITRG), said: “The new savings income rules have their own set of complexities for some, but are good news for many people on low incomes as they no longer have to reclaim tax on savings in future.
“The problem with change is that it can be confusing and there is a risk that people will now forget to reclaim tax for earlier years thinking they no longer need to do anything, which is a worry.
“When checking last year’s tax, it is worth looking at earlier years, too. You usually only have four years to claim back overpaid tax.”