Tax overpaid on savings
The R40 form Claim for repayment of tax deducted from savings and investments is available on the GOV.UK website. Individuals who have paid too much tax on interest can use the R40 form to claim back any overpaid tax. The form and associated guidance have been updated for the 2020-21 tax year.
Claims can be backdated for up to four years after the end of the tax year. This means that claims can still be made for overpaid interest dating back to the 2016-17 tax year ending 5 April 2017. The deadline for making claims for the 2016-17 tax year is 5 April 2021.
The personal savings allowance 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 taxpayers i.e. those earning over £150,000.
Banks and building societies no longer deduct 20% tax on savings interest. However, form R40 can still be used to claim back tax overpaid on savings.
HMRC are reminding pensioners that they may have paid too much interest on savings held in bank and building society accounts. The related news release is also valid for other non-taxpayers such as children and those taxpayers who are only liable to pay the reduced 10% savings rate.
Banks and building societies must deduct 20% tax from savings interest unless notified otherwise. Non-taxpayers who are eligible to receive interest gross must complete form R85 and send it to their bank or building society in order to receive future interest without any tax deductions.
Individuals who have paid too much tax on interest can use form R40 which is available on HMRC’s website to claim back any overpaid tax. Claims can be backdated for up to five years from 31 January following the end of the tax year. This means that claims can be made now for overpaid interest dating back as far as the 2003-4 tax year which ended on 5 April 2004. The deadline for making such claims is 31 January 2010.
The R40 form can also be used by taxpayers whose savings income should have been taxed at the 10% rate. This affects taxpayers whose earnings are less than their personal allowance plus £2,320.