Tax overpaid on savings
The R40 form ‘Claim for repayment of tax deducted from savings and investments’ is available on the GOV.UK website. Banks and building societies usually deduct 20% tax on savings interest. Individuals who have paid too much tax on interest can use the R40 form to claim back any overpaid tax. Claims can be backdated for up to four years after the end of the tax year. This means that claims can be made now for overpaid interest dating back as far as the 2012-13 tax year which ended on 5 April 2013. The deadline for making claims for the 2012-13 tax year is 5 April 2017.
The R40 form can also be used by taxpayers whose savings income should have been taxed at the 10% rate. HMRC has recently updated the section of the form relevant to purchased life annuities. Non-taxpayers who are eligible to receive interest gross of tax must complete form R85 and send it to their bank or building society in order to receive future interest free of tax.
The new Personal Savings Allowance came into effect from April 2016 and provides for an exemption of up to £1,000 of a basic rate taxpayer’s savings income, and up to £500 of a higher rate taxpayer’s savings income. The PSA is not available to additional rate (45%) Income Tax payers. Banks and building societies are no longer deducting tax on savings interest as a matter of course. However, the R40 form is still relevant for claiming back tax overpaid in previous tax years.