I shouldn't have been taxed on my savings, what can I do?

Certain types of products, such as cash Isas and premium bonds, are tax free. If you believe you've been mistakenly taxed on your savings, find out what you should do.
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Tax on savings explained

Your savings income is any money you earn in the form of interest.

This could be from a savings account, or from corporate or government bonds. Certain types of savings products are tax-free.

Any interest you earn in a cash Isa is paid completely free of tax. The same is true for any prizes you win on premium bonds.

And you don't need to start paying any tax until your total income from all sources for the tax year (which runs from April 6 to April 5) exceeds your annual personal allowance.

We've produced a number of guides which explain the latest tax-free income sources and allowances.

Those aged over 65 receive additional age-related allowance, but this is withdrawn if their income goes above a certain rate.

In summary

  • You can claim a tax refund on deductions from your savings by completing an R40 form from HMRC
  • If you're a non-taxpayer, you can stop tax being deducted by completing an R85 form, also from HMRC
  • See how to complain about poor services or delays from HMRC

Personal tax allowance

Personal allowance is also progressively reduced for anyone with an income above £100,000.

Anything you earn over your personal allowance is subject to income tax.

So, even if you receive just a few pounds a year on a badly paying savings account, you still need to declare this information on your self-assessment tax return.

If you are PAYE tax, you won't have a tax return to fill in and tax will be deducted automatically at source for most accounts, at 20%.

Higher-rate taxpayers need to pay more tax and need to complete a self-assessment tax return.

Tax paid on savings

Your savings income will be taxed after being added to your other income and after your personal allowance has been taken into account.

See the Which? Money guide on tax rates allowances and amounts.

Most interest you earn has tax deducted at 20% before you receive any payment.

Basic-rate taxpayers then have no more tax to pay, but higher or additional-rate taxpayers will have to pay a further 20% or 30%. 

Non-taxpayers can claim a refund for tax that has been deducted from their savings income.

HMRC tax refunds on savings income

You can claim a refund of tax that has been deducted from your savings income by completing an R40 form, available from HMRC.

If you're a non-taxpayer because your income is below your personal allowance, you can stop tax being deducted by completing a R85 form, also available from HMRC. 

You’ll need to complete one for each bank or building society you use.

See our guide on how to complain about poor service from HMRC.

Which? Money Compare

If you want to make sure that your savings account gives you good quality customer service as well as a decent interest rate, check out Which? Money Compare’s savings account and ISA comparison tables.

Which Ltd is an Introducer Appointed Representative of Which? Financial Services Ltd, which is authorised and regulated by the Financial Conduct Authority.

Which? Mortgage Advisers, Which? Insurance Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

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