Registering for gross receipts of interest
HMRC have updated their leaflet IR111 entitled ‘Bank and building society interest – Are you paying tax when you don’t need to?’
This is relevant to UK residents whose income is low enough for them to claim exemption from the tax that is normally deducted from the interest paid by banks and building societies.
The leaflet contains a copy of the R85 form which should be completed in order to receive interest gross. It also explains how to claim a refund of tax already deducted from interest payments where the recipient was entitled to receive interest tax free or at the lower 10% savings rate.
Children aged under sixteen are entitled to their own tax allowance so would normally be receiving interest without any tax deductions by banks or building societies. The leaflet contains a reminder of an important exception to this rule. It applies where parents gift significant amounts of money to children which result in interest of more than £100 (before tax) annually. In these circumstances, children are not entitled to receive the interest tax free.