Why do you need to fill a form R85 and what to do in case of tax over payments?

What is R85 Form

If your income for the year is below your personal tax allowance for savings, you need to fill Form R85. This form is legal declaration. It informs building societies and banks that they should not tax interest on your accounts with them.

R85 Form

HMRC has established £11,500 as personal tax allowance for the tax year 2017/2018. This means that you will pay no tax up to £11,500 of total annual income. Your income over and above £11,500 is liable for tax at 20%.

Interest income from following sources are covered by this tax allowance and R85:

1. Accounts with banks and building societies
2. Savings and credit union accounts
3. Trusts (unit trusts/investment trust)
4. Personal peer lending
5. Open ended investment companies
6. Annuity payments
7. Life insurance agreements
8. Government or company bonds

You may also need to file a Form R85 for one of the following reasons:

• If you are supporting a saver who has reduced capacity for themselves
• If you are acting as parent/guardian of a child who is primary account holder
• If you are acting only in capacity of power of attorney holder of an account

In order to fill a R85 form, you need to calculate your total annual income. This should include your work income, income from rents, annuities and interests from investments and savings, taxable benefits, and private and state benefits. This excludes ISA’s.

You need to fill a separate R85 form for each account you hold. For example you have one building society account and two bank accounts, you will have fill three R85 and submit for each account separately. This applies even when you have two accounts at one place.

Accounts that have a R85 form submitted on them will be refunded if you have already paid the tax on some income during current year. You will receive gross interest amount in your accounts without any tax deductions.

In order to claim the refund, fill in Form R40. You need to complete the R40 form and submit it to HMRC within four years of the end of the tax year for which you are claiming refund. It usually takes six working week days to get the tax refund.