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Savings and tax

Make sure you don't pay too much tax

Unless you're saving in an ISA, you'll normally have to pay tax on your savings interest. How much tax you pay depends on your individual circumstances, and there are some situations where no tax is payable.

Basic rate tax

We automatically deduct basic rate income tax from the interest paid on all savings accounts except ISAs. If you're a basic rate taxpayer, you don't need to take any further action.

Higher rate tax

If you're a higher rate taxpayer, you may have additional tax to pay.

Non taxpayers

If you don't pay income tax, you may not need to pay any tax on your savings interest. This could be the case if you're retired, not working or the savings belong to a child.

For joint accounts, it's possible for part of the interest to be paid without tax if one or more of the account holders is a non-tax payer.

Before we can pay interest without deducting tax, you need to register for gross interest. There are three ways to register:

  • By phone - call us on 0845 602 2828. Make sure you have your national insurance number to hand
  • By post - send us a completed form R85 (PDF, 40Kb)
  • Online - you can register a new internet account for gross interest as part of the online application process

Power of attorney accounts

For accounts operated under a power of attorney, it's the tax status of the beneficiary that decides whether or not tax is payable. If the beneficiary is a non-taxpayer, the person who manages the account should complete form R85 on their behalf.

Backdated tax

If you think you've paid tax on your savings that you shouldn't have, you can reclaim it from HM Revenue and Customs. You have five years from 31 January after the end of the tax year for which you're claiming back tax to make your claim.

For example, if you paid more tax than you needed to for the tax year 2003-2004, you have until 31 January 2010 to claim your tax back.

You'll need a tax certificate for each year you're claiming.

Tax certificates

If you need a tax certificate for the present or past tax years to help you complete your tax return, or reclaim overpaid tax, write to:

BM Savings team
Birmingham Midshires
PO Box 81
Wobaston Road
Wolverhampton
WV9 5BR

Gross is the contractual rate of interest payable before the deduction of income tax at the rate specified by law.

*AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year. As every advertisement for a savings product which quotes an interest rate will contain an AER, you will be able to compare more easily what return you can expect from your savings over time.

NET rates are illustrative only, allowing for the deduction of income tax at 20%. If you are a higher rate tax payer, you may have a further amount to pay. If we deduct more tax than you have to pay this can be reclaimed from HMRC.

Tax Free means free from personal liability to Income Tax.

For telephone line opening times, please read the information in our contact section. Calls may be monitored and recorded for security and training purposes. If you're calling from outside the UK, please dial +442920781145.

© Birmingham Midshires
This site is intended for UK residents unless otherwise stated.
Birmingham Midshires is a division of Bank of Scotland plc, which is authorised for accepting deposits by the Financial Services Authority. It is entered in the FSA's Register and its Register Number is 169628. Registered in Scotland No. SC327000. Registered Office: The Mound, Edinburgh, EH1 1YZ.
To contact the FSA Consumer helpline, please ring 0300 500 5000 or visit www.moneymadeclear.org.uk/.