Tax On Interest

[Barsel]

A year ago I opened accounts for my grandchildren. I can't remember the name of the type of account it was, but I had to open an account in my name and then a certain amount would go from my account into theirs every month. After a year the interest was added and I noticed that tax was paid even though I'm no longer a tax payer and at age 2 and 8 neither are my grandchildren. how do I claim this tax back and why was it taken in the first place?

[Old_Geezer]

I suspect all savings accounts deduct standard rate tax as default. The tax office then demands more from those on higher rate, I assume you could try to reclaim the tax back from the tax office if you give them the details ?

[Sipowicz]

http://www.hmrc.gov.uk/forms/r85.pdf

[Barsel]

Sipowicz, is that form one you fill in when you open an account or to claim back money that's already been paid? Also, how do I find out where to send the form to? Thanks.

[ladybirder]

Barsel the bank in question will provide the form. Ask them:-)

[ubasses]

Just go into your Bank, they will give you the R85 and send it off for you. You will get a refund of any tax for this Tax year.

[Peter Pedant]

It is done of course to prevent indulgent grandparents from usig their offspring well as a tax haven

a year ago - [only] you should have no difficulty in claiming back.

You pay no tax - christ are you living on grass soup ?

[hc4361]

Peter Pendant, the individual tax allowance is at least £10000. A couple with no mortgage can comfortably live on £20k and even if the spouse is a millionaire the 10k tax allowance still applies.

[Barsel]

Many thanks for your answers. I will print the form that Sipowicz sent the link for and send it off.

[kjn2]

A Form R 85 is not always required to be completed, banks now accept self declaration, ring the bank explain the situation and they will then designate the account as non tax payer, you will then have to reclaim the tax paid from HMRC.

[Barsel]

No need to do that for the future kjn2 as I got so annoyed with them in the bank I ended up closing mine and the grandchildrens accounts.It wasn't just because of the tax thing, there were other issues that they seemed unable to deal with so I asked for the manager and closed the accounts. Personally, it wouldn't occur to me that young children would have to pay tax on their interest.

[factor-fiction]

I think tax is deducted at source unless a declaration is completed that the account holder is not a tax payer. I'm not sure how yours worked but maybe it was your tax position that mattered. Anyway, you can still try to get the tax back even if you've closed the account- or was the tax deducted from your grandchild's account?

[Barsel]

factor-fiction the tax was deducted from the interest of my grandchildren's account, that's what I can't understand, because they knew the children are aged 2 and 8 as I had to take their birth certificates in when I started the account for them so you'd think the bank would know they're not tax payers.

[factor-fiction]

http://www.moneysavingexpert.com/savings/child-savings-tax-free

There's a common myth that children don't pay tax - that's simply not true. In fact, they're taxed in exactly the same way as adults. Each child can, in the 2014-15 tax year, earn up to £10,000 tax-free from salary, savings or investments.

The difference is, unlike most adults, most children don't use up their allowance, so their savings interest is tax-free.

Assuming your child won't earn more than £10,000 (watch out child prodigies!), ensure any interest is paid without tax being automatically deducted by filling out the Inland Revenue's R85 form (the bank should give you one of these).

If you've already overpaid, you'll need to fill out an R40 form to get it back.

[Barsel]

Thanks for the link factor-fiction that's very helpful.