Should my savings earn untaxed interest?

If that is your only taxable income, then yes - apply for gross interest. And don't forget to claim back any tax already deducted.

You should also investigate whether you are entitled to any rebate for tax deducted at source in the financial year to April 2008. If you did not earn through work more than £7455 in that year, then the tax deducted from your savings income will have been too much.

In addition, consider whether you could get a better rate of interest elsewhere. If you can put a portion of lump sum away for a year, you could be getting up to 7.2% gross on that, and there are instant access internet accounts offering up to about 6.6%. See:

Thanks for the help (likewise to Martin).

How does one get the gross interest paid? The default always seems to be net interest; I don't remember ever having been asked if I wanted my interest net or gross when I've applied for an account. Is it as simple as getting on the blower to the bank where the account is?

JD

Are you not getting carer's allowance? It sounds like you'd be entitled, it's not affected by savings (though income from savings might reduce it, I'm not sure).

It'd also give you basic and second state pension credits (you may already have enough years for the basic state pension but it's definitely worth getting credits for the second state pension).

No, but I'm working on it. My parent first needs to be getting Attendance Allowance, before I can apply for Carer's Allowance, I gather. I have put in the application for the first one.

Thanks; I wasn't aware of that.

But going back to my original question... If I apply for gross interest on my savings, will the IR then start sending me tax returns every year? That's a hassle I could do without.

JD

I am retired and assumed that the allowance left over on my tax code number after pensions allowed me to claim Gross Interest. Towards the end of last year I had a letter from the tax person saying that the interest earned had taken me out of that situation. They asked for a list of all bank and building societies that I had accounts with and they were going to write to them to cancel my gross interest. I explained that for about three months I had a lot more than usual in my accounts as I had cashed in a Shares ISA to fund a protected house purchase, that cut no ice. I told her that I was about to put a sum into tax free index linked certificates and also some into premium bonds.She said that I would still be over the interest limit. Northern Rock immediatly stopped paying gross interest but none of the others have. Tom

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The tax return for simple cases is very much simpler than it used to be, even if they do send it. Moreover, if you don't you will need to fill in a tax reclaim form, which is very similar, to get the tax back.

Your original post said the interest was your only income. But if you are receiving a state and/or occupational pension, that changes the situation enormously.

Unless your total gross taxable income from all sources is less than your annual Personal Allowance (and note that your PA depends on your age) I doubt you're eligible for gross interest.

Unless HMRC have got your tax code very wrong, I doubt it will leave you with so much over-deducted tax on your occupational pension that you could justify receiving interest gross.

Without all the relevant figures, I don't think I can advise further.

Nevertheless, HTH...

That wasn't the same person.

You seem to be mixing up two posts and do you know how little the State Pension is? Tom

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Oops - sorry - in my haste I hadn't spotted that.

Yes, alas - though the exact amount depends on individual circumstances, of course. But it abosrbs a fair amount of the tax-free allowance, so there's not that much head-room for other pension income before interest becomes taxable.