I'm taking 5 months off work (lucky me, I know).
Currently I'm in the 20% income tax bracket and my non-ISA savings are being taxed at that rate. Should I / can I contact the IR and tell them not to tax my savings until I start working again? (savings are under 10k).
Thanks for any suggestions.
If you earn enough in the remaining 7 months of the Tax Year to use up your personal allowance, your salary - and potentially the interest on your savings - will still be taxable. I don't think in these circumstances that you're entitled to have your interest paid gross - but if you end up paying too much tax for any reason you'll be able to reclaim it at the end of the tax year.
I suppose it might depend on whether the OP knows he's going back to a job or whether he's taking five months off and then going to look for a job.
In the former you might be correct if he knows he will earn enough in the tax year. But if the latter then it seems to me that it's correct for him to make the Rwhatever declaration exactly as it would be if he wasn't planning on working and then decided to get a job later in the year.
Tim.
Thanks for the comments - to clarify my situation, I'm taking 5 months off and then I will start to look for a job, so I have no idea when I will get my next job or whether I will make enough money to exceed my personal allowance (although I'm sure I will - I'll be looking for a decent salaried position).
I suspect it's likelier that the condition for being allowed to have interest credited gross is that you have to know you won't earn enough than that you have to not know that you will.
You've said your savings are under £10k, so the interest is likely to be under £600, and the tax thereon under £120. It's hardly worth making a fuss over, given that you would in any case be able to claim any overpaid tax back.
And what's the cut off point for "know you won't earn enough"?
Anyone with a premium bond will earn enough interest in about 5 weeks to have to pay tax if they win the jackpot even if they've got no other income. Ditto the lottery.
I think the OP is perfectly OK filling in an R85 (is that the right number?) now. But he could also ring up the tax office.
Except that, if he doesn't get a job straight away, that £60 could make a difference as he spends his savings while job hunting.
Tim.
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