Bank and building society interest
HMRC have issued the 2010 version of the R85 form which should be completed in order to receive bank and building society interest gross.
Also available from HMRC is leaflet IR111 entitled ‘Bank and building society interest – Are you paying tax when you don’t need to?’. The leaflet contains useful information to assist UK residents in ascertaining whether or not they should be paying tax on interest received from banks and building societies.
The R85 form can also be used for bank accounts held by children under sixteen who are also entitled to a tax allowance and usually should be receiving interest without any tax deductions. There is an important exception to this rule which applies where parents gift significant amounts of money to children which results in interest of more than £100 (before tax) annually. In these circumstances, the parents are taxed on the income and thus the children are not entitled to receive the interest tax free.