Savings interest is typically viewed by HMRC as taxable income and in some cases you could be owed a rebate of the tax deducted.
Income from savings can come from different sources for example your bank or building society or from a PPI tax rebate.
There a few scenarios where individuals can overpay tax on savings interest so with the 2022/2023 tax year coming to end soon it’s a good time to check if you have overpaid tax on any interest from savings.
Why would I be due a Savings Interest Tax Rebate?
You can overpay tax on interest from savings in circumstances where you didn’t earn enough to pay tax or your interest income is covered by the personal savings allowance or the starter rate for savings.
The personal savings allowance (PSA) covers interest income up to the value of £1000 for basic rate taxpayers and £500 for anyone paying at the higher rate.
A starter rate for savings is separate from the PSA and is applicable to lower earners with an income between the personal allowance up to £17570.
Four year Interest Tax Rebate Timescale
HMRC gives you four tax years to claim back what you are owed which could mean you can claim back for more than just one tax year at the same time.
Use the R40 to claim your Savings Interest Tax Rebate
The R40 form needs to be completed unless you are in self assessment in which case you need to include your interest figures on your tax return.
An individual R40 needs to be completed for each tax year of your claim and can be processed online or you can send it to HMRC via the post to the address on the form.
PPI Refund Tax Rebate
A tax rebate is possible if you have received a PPI refund because tax is usually deducted from the interest part of the PPI refund payout.
This isn’t the normal type of interest income however if you have received a PPI refund and paid tax on the interest portion you may well be due a refund of the tax paid.
