Once again, there has been quite a significant increase in the personal allowances for people over the age of 65. Combine that rise with the sharp fall in interest returns on cash and I am now finding some clients who can claim back 20% tax on interest which they could not do before – or at least a lot more of it.
Please remember that it is not just tax on bank and building society interest that can be reclaimed but also interest on a wide variety of fixed interest securities, commonly called corporate bonds held either in joint names or singly outside an ISA wrapper.
And with pensioner inflation running at a higher rate than ordinary inflation, anybody who has older relations who might be non-taxpayers or who might be able to reclaim some income tax on interest has a duty, I suggest, to try to ensure that the interest is reclaimed. You/they only have to complete a four page reclaim form.
Remember also that most people who fall into the basic rate tax bracket don’t complete tax returns in retirement unless they are either high rate taxpayers because of other sources of income and/or have offshore investments. So many people who are eligible for a tax reclaim, don’t claim because they don’t receive a tax return. That’s an unfair bonus for the Government.
| Income Tax Allowances Table | 2007 - 08 | 2009 - 09 | 2009 - 10 |
| Personal Allowance | £5,225 | £6,035 | £6,475 |
| Personal Allowance for people aged 65-74 (1) | £7,550 | £9,030 | £9,490 |
| Personal Allowance for people aged 75 and over (1) | £7,690 | £9,180 | £9,640 |
| Married Couple's Allowance (born before 6th April 1935 but aged under 75 (1) (2) (3) |
£6,285 | £6,535 | N/A |
| Married Couple’s Allowance –aged 75 and over (1) (2) | £6,365 | £6,625 | £6,965 |
| Income limit for age-related allowances | £20,900 | £21,800 | £22,900 |
| Minimum amount of Married Couple’s Allowance | £2,440 | £2,540 | £2,670 |
| Minimum amount of Married Couple’s Allowance | £1,730 | £1,800 | £1,890 |
(1) These allowances reduce where the income is above the income limit – by £1 for every £2 of income above the limit. However they will never be less than the basic Personal Allowance or minimum amount of Married Couple’s Allowance.
(2) Tax relief for the Married Couple’s Allowance is given at the rate of 10 per cent.
(3) In the 2009-10 tax year all Married Couple’s Allowance claimants in this category will become 75 at some point during the year and will therefore be entitled to the higher amount of the allowance – for those aged 75 and over.
Income Tax Rates and Taxable Bands
| 2007 - 08 |
|||
| Starting Rate: 10% | £0-£2,230 | ||
| Basic rate: 22% |
£2,231-£34,600 | ||
| Higher rate: 40% | Over £34,600 |
||
| 2008 - 09 |
2009 - 10 |
||
| Starting rate for savings: 10% * |
£0-£2,230 | N/A | |
| Basic rate: 22% | £0-£34,800 | £6,965 | |
| Higher rate: 40% | Over £34,800 | Over 37,400 |
* From 2008-09 there is a 10 per cent starting rate for savings income only. If your non-savings income is above this limit then the 10 per cent starting rate for savings will not apply.
The rates available for dividends are the 10 per cent ordinary rate and the 32.5 per cent dividend upper rate.
Printed from HM Revenue & Customs website.
