Savings Interest and Taxation

Everyone who lives in the United Kingdom (for tax purposes, the Channel Islands and the Isle of Man are not in the UK) is allowed to earn or receive some income before tax has to be paid. If you need specific advice regarding your tax position or are unsure of your tax status, please contact your tax adviser or your local tax office and they will advise you. Alternatively, you can visit H M Revenue & Customs (HMRC) website.

Depending on your tax status you may or may not pay tax on your savings interest.

Changes to savings interest and taxation from 6th April 2016

From 6th April 2016, a new Personal Savings Allowance is being introduced meaning most UK adults will be able to earn up to a certain amount in savings interest without paying tax. As part of this, banks and building societies will no longer automatically deduct tax on interest earned on savings.

Find out more

Savings interest taxation up to 5th April 2016

If you’re a tax payer

Up to 5th April 2016 we will continue to deduct tax at 20% from any interest we pay on your Leeds Building Society savings accounts with the exception of tax free savings accounts, such as ISAs or Child Trust Funds. If your taxable income is £15,600 or less you could be eligible for zero tax savings.

If you need specific advice regarding your tax position or are unsure of your tax status, please contact your tax adviser or your local tax office and they will advise you. Alternatively, you can visit H M Revenue & Customs (HMRC) website.

The following information is correct up to 5th April 2016.

If you're a basic rate taxpayer (20%)

If you’re a basic rate taxpayer you don’t need to take any action. Building societies are required to deduct tax at a rate of 20% from interest paid or credited to investors.

If you're a higher rate taxpayer (40%)

If you’re a higher rate taxpayer you must contact HMRC to tell them how much interest you have received so that they can collect the extra tax due directly from you. If required, we can arrange to send you a letter for this purpose. Contact us on 0113 225 7777 or visit your local branch for more details.

If you're a non-taxpayer

If your income is below your personal allowance limit and you have money in a bank or building society account which earns interest, you may be paying tax when you don’t have to. This means you could be eligible to receive your interest without any deduction of tax.

If this is the case, you will need to complete an Income Tax: get interest without tax taken off (R85) form. The R85 form should be completed and returned to your local branch or sent directly to our Head Office. The R85 form is only applicable for UK residents whose income is below their personal allowance. You can request an R85 from the Society or download one from HMRC website. If you are using an R85 supplied by the Society, a separate R85 form is required for each account and account holder. Once the form is registered, Leeds Building Society may be able to refund the tax paid. This applies to tax deducted in the current tax year only. We cannot repay tax from earlier years. The Society does not subscribe to the R105 scheme and we do not accept R105 forms which, means if you have moved abroad we cannot register your account and pay gross interest. Crown Employees can be registered using an R85 form.

Children's accounts

An R85 form must be completed if the account is held in a child’s name and he/she is a non-tax payer. If the child is under 16, the form must be completed and signed by the parent or guardian. When the child reaches the age of 16, a new R85 form must be completed, signed by the child (account holder) and returned to your local branch or sent directly to the Society. The month following the child’s 16th birthday we will automatically cancel any previous R85 registration and provide a new R85 form – so you don’t have to remember to do this.

There are special rules if a parent has given savings to their child. Where monetary gifts from a parent will earn more than £100 gross interest a year, the whole of the interest from the gifts is taxed as the parent’s interest. A child cannot claim back any tax on that interest. Nor can interest be paid without tax taken off. The £100 rule applies to young people until they reach 18 or marry (whichever comes first). The £100 rule applies separately to each parent. It does not apply to gifts given by grandparents, other relatives or friends.

Bare Trusts

An R85 form must be completed if the account is held in a child’s name and he/she is a non-tax payer. If the child is under 16 the form must be signed by a parent or guardian. When the child reaches 16 we will automatically cancel any previous R85 registration. We are unable to register another R85. This is because this type of account has a trustee and the HMRC rules exclude this. Tax will be deducted following the child’s 16th birthday. This can be claimed back directly from the HMRC.

Once the child is 18 the trustee can be removed from the account and, if the young adult is still eligible, they can then complete a new R85. For the period between the child’s 16th and 18th birthday they would have to claim tax back directly from HMRC and would require a Statement of Deduction of Tax (see below).

For more information on Bare Trusts, visit HMRC's website

If your tax status has changed

You may already have registered an R85 form but have found your tax status has changed and you now pay tax. In this case, you must cancel your registration by contacting the Society and tax will be calculated from the date interest was last paid to you.

To find out which rate applies to you or to an account you look after for someone else, please visit HMRC website.

Claiming back tax

If you think you’ve paid too much tax on your savings interest, you can claim it back directly from HMRC. To do this you’ll need to fill in a R40 Tax Repayment Form. You’ll have to do this for each year you think you paid too much tax. In most cases you should be able to get back the tax you’ve overpaid providing you make your claim on time.

If you have a tax office you should contact them and tell them you believe you can claim back some tax. They will tell you what you need to do. If you don’t have a tax office, you should complete form R40 Tax Repayment and send it directly to HMRC.

For further details please call HMRC on 0300 200 3312 (lines are open Monday to Friday 8:00am – 8:00pm and Saturday 8:00am – 4:00pm) or visit HMRC's website.

If you have registered an R85 for an account at Leeds Building Society it is valid for the full year it was registered in and future years until it is cancelled either by the account holder, HMRC or the account is closed. This means the Society will refund tax paid for the tax year the R85 is valid for. We cannot repay tax from earlier years.

Statement of Deduction of Tax - Section 975 of the Income Tax Act 2007

If you are registered with the Society to receive a Statement of Deduction of Tax, you will receive a Statement of Deduction of Tax for each account you have registered. You will continue to receive a statement each year until the account is closed or you tell us you no longer need them. You will need these statements as evidence of the tax you have paid for each tax year. You have a legal obligation to keep records for tax purposes for the following reasons:

  • You need to complete an income tax return,
  • You are not registered as a non-tax payer,
  • Your tax deducted exceeds your total tax liability and the certificate is required in order to claim any tax refund.

If you need a Statement of Deduction of Tax for your Leeds Building Society accounts, please contact our Customer helpline on 0113 225 7777 or visit your local branch.

If you need further help in deciding whether your interest should be paid without tax taken off, visit HMRC website or call HMRC Registration Helpline on 0300 200 3312. Lines are open Monday to Friday 8:00am – 8:00pm and Saturday 8:00am – 4:00pm. The Helpline telephone numbers given are only for enquiries about bank and building society interest.

This webpage is not tax advice and Leeds Building Society cannot provide tax advice. However, we will try and help with any queries you may have. Please visit your local branch or telephone 0113 225 7777.