Readers' lives: Going offshore won't sink your tax liability

Interest in Jersey ... tax-free rent ... finding an IFA. Your financial queries answered

My retired mother recently opened a deposit account in Jersey, believing she would not have to pay tax on the interest. Now she thinks she should pay tax but wants clarification of the exact position. Could you offer advice?

IS, Hertfordshire

Like it or not, if you live in the UK you are probably 'UK tax resident' - which means you are subject to UK income tax, even on interest earned on savings outside mainland UK. If your mother counts as UK-resident, the interest on this offshore Jersey account probably faces tax.

An exception would be if her total taxable income - including the interest earned in Jersey - is less than her tax-free personal allowance. Also, if she earned interest abroad which had tax deducted at source, she would normally be able to reduce her UK tax liability by the amount of tax already deducted abroad.

In the case of offshore tax havens such as Jersey, where interest is paid gross, a taxpayer is liable to tax on the interest. Details of interest paid during the current tax year (from 6 April 1997 to 5 April 1998) should be included on the tax return your mother receives next April. If your mother does not receive a tax return she should contact her tax office and ask for one. If she is not sure which tax office covers her, she can find out by contacting any tax enquiry centre listed in her local phone book.

There was a time when something called composite-rate tax was automatically deducted at source from deposit interest in the UK. Non-taxpayers (such as people on low incomes, including non-working spouses) were not able to reclaim the tax, so they were encouraged to open gross-paying offshore accounts. Nowadays, basic-rate tax is deducted at source in the UK but non-taxpayers can reclaim the tax and, indeed, register to have interest paid without deduction of tax (ask your bank or building society for an IR85 form).

For people who are UK tax residents, the only tax advantage in opening an offshore deposit account is that there can be a period between having interest credited and paying tax on the interest. This allows you to earn a little extra interest on the delayed tax. But this tax advantage is likely to be fairly marginal for most people. The main thing to consider is whether you can actually get a higher interest rate offshore. Bear in mind that accounts opened with offshore branches of building societies don't usually entitle you to receive free shares should the society convert to a bank.

I'm about to take in a lodger. Do I have to notify the tax authorities? I understand the rent from a lodger is now tax-free.

CL,Bristol

The chances are that your lodger's income will come under the "rent- a-room" scheme. You can get leaflet IR87 from tax offices to find out whether you qualify. The scheme allows you to receive up to pounds 4,250 a year tax-free from lodgers in the home where you live yourself - roughly pounds 354 a month or pounds 81 a week. If two or more of you share rent from lodgers (as may be the case when couples or groups of singles buy a property together) the annual tax-free allowance is pounds 2,125 each. Rental income over the tax- free amount is taxable and the Inland Revenue requires it to be declared.

I need a(n independent) financial adviser. Are there services listing IFAs in my locality?

RC, Bolton

There are two free telephone enquiry services for getting lists of IFAs. Both will send their lists according to the postcode you give - so, for example, if you prefer to have an adviser near to where you work, give your work rather than home postcode. And while you get their details of IFAs for free, the IFAs are not given your details, so you do not need to worry about them pestering you.

Of the two services, the register of fee-based advisers run by Money Management, a personal finance magazine, should be your first port of call. Telephone 0117 976 9444, give your postcode and details of any specialisations you are looking for in an adviser (for example pensions, mortgages, investments). You'll then be sent six names. All will offer you the option of paying fees for any work they do for you rather than paying commission, which should give them less incentive to sell you something. Initial meetings should be free.

IFA Promotion, a marketing body for advisers, on 0117 971 1177, will also send a list of three advisers in your chosen postcode area. IFAP can supply further names, and first visits are always free. But many of the IFAP advisers will not offer the fee-based option - they will only work on commission. Last year 82,000 people called the IFAP service, of which 36,000 subsequently contacted an adviser.

Write to Steve Lodge, Personal Finance Editor, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL, and include a phone number, or fax 0171-293 2096 or e-mail s.lodge@ independent.co.uk. Do not enclose SAEs or any documents you wish returned. We cannot give personal replies or guarantee to answer every letter. We accept no legal responsibility for advice given.

Arts & Entertainment
The Honesty Policy is a group of anonymous Muslims who believe that the community needs a space to express itself without shame or judgement
music
News
Waitrose will be bringing in more manned tills
newsOverheard in Waitrose: documenting the chatter in 'Britain's poshest supermarket'
Life & Style
life
Arts & Entertainment
Back in the suit: There are only so many variations you can spin on the lives or adventures of Peter Parker
filmReview: Almost every sequence and set-up in The Amazing Spider-Man 2 seems familiar from some earlier superhero film
VIDEO
Have you tried new the Independent Digital Edition iPad app?
Arts & Entertainment
Jack Gleeson as Joffrey Baratheon in Game of Thrones
tv
Life & Style
Father and son: Michael Williams with son Edmund
lifeAs his son’s bar mitzvah approaches, CofE-raised Michael Williams describes the unexpected joys he’s experienced in learning about his family’s other faith
Arts & Entertainment
Ian Anderson, the leader of British rock band Jethro Tull, (right) and British guitar player Martin Barre (left) perform on stage
musicJethro Tull frontman leads ‘prog rock’ revival
Sport
Gareth Bale dribbled from inside his own half and finished calmly late in the final to hand Real a 2-1 win at the Mestalla in Valencia
sport
Arts & Entertainment
Who laughs lass: Jenny Collier on stage
comedy... writes Jenny Collier, the comedian whose recent show was cancelled because there were 'too many women' on the bill
News
House proud: keeping up with the Joneses now extends to children's playhouses
newsLuxury playhouses now on the market for as much as £800
News
news
Life & Style
Stir it up: the writer gets a lichen masterclass from executive chef Vivek Singh of the Cinnamon restaurants
food + drinkLichen is the surprise new ingredient on fine-dining menus, thanks to our love of Scandinavian and Indian cuisines
Extras
indybest
Arts & Entertainment
Ken Loach (left) and Mike Leigh who will be going head to head for one of cinema's most coveted prizes at this year's Cannes Film Festival
filmKen Loach and Mike Leigh to fight it out for the Palme d'Or
News
The academic, Annamaria Testa, has set out on her website a list of 300 English words that she says Italians ought to stop using
newsAcademic speaks out against 'Italianglo' - the use of English words in Italian language
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    1st Line Helpdesk Engineer Apprentice

    £150.00 per week: QA Apprenticeships: This company has been providing on site ...

    Telesales & Sales Support Apprentice

    £221.25 per week: QA Apprenticeships: This company is a well established Inter...

    Client Relationship Manager - SQL, Python

    £40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...

    **Financial Services Tax**

    £35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...

    Day In a Page

    How I brokered a peace deal with Robert Mugabe: Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC

    How I brokered a peace deal with Robert Mugabe

    Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC
    Video of British Muslims dancing to Pharrell Williams's hit Happy attacked as 'sinful'

    British Muslims's Happy video attacked as 'sinful'

    The four-minute clip by Honesty Policy has had more than 300,000 hits on YouTube
    Church of England-raised Michael Williams describes the unexpected joys in learning about his family's Jewish faith

    Michael Williams: Do as I do, not as I pray

    Church of England-raised Williams describes the unexpected joys in learning about his family's Jewish faith
    A History of the First World War in 100 moments: A visit to the Front Line by the Prime Minister's wife

    A History of the First World War in 100 moments

    A visit to the Front Line by the Prime Minister's wife
    Comedian Jenny Collier: 'Sexism I experienced on stand-up circuit should be extinct'

    Jenny Collier: 'Sexism on stand-up circuit should be extinct'

    The comedian's appearance at a show on the eve of International Women's Day was cancelled because they had "too many women" on the bill
    Cannes Film Festival: Ken Loach and Mike Leigh to fight it out for the Palme d'Or

    Cannes Film Festival

    Ken Loach and Mike Leigh to fight it out for the Palme d'Or
    The concept album makes surprise top ten return with neolithic opus from Jethro Tull's Ian Anderson

    The concept album makes surprise top ten return

    Neolithic opus from Jethro Tull's Ian Anderson is unexpected success
    Lichen is the surprise new ingredient on fine-dining menus, thanks to our love of Scandinavian and Indian cuisines

    Lichen is surprise new ingredient on fine-dining menus

    Emily Jupp discovers how it can give a unique, smoky flavour to our cooking
    10 best baking books

    10 best baking books

    Planning a spot of baking this bank holiday weekend? From old favourites to new releases, here’s ten cookbooks for you
    Jury still out on Manchester City boss Manuel Pellegrini

    Jury still out on Pellegrini

    Draw with Sunderland raises questions over Manchester City manager's ability to motivate and unify his players
    Ben Stokes: 'Punching lockers isn't way forward'

    Ben Stokes: 'Punching lockers isn't way forward'

    The all-rounder has been hailed as future star after Ashes debut but incident in Caribbean added to doubts about discipline. Jon Culley meets a man looking to control his emotions
    Mark Johnston: First £1 million jackpot spurs him on

    Mark Johnston: First £1 million jackpot spurs him on

    The most prize money ever at an All-Weather race day is up for grabs at Lingfield on Friday, and the record-breaking trainer tells Jon Freeman how times have changed
    Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

    Ricky Gervais: 'People are waiting for me to fail'

    As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
    Mad Men series 7, TV review: The suits are still sharp, but Don Draper has lost his edge

    Mad Men returns for a final fling

    The suits are still sharp, but Don Draper has lost his edge
    Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

    Google finds a lift into space will never get off the ground

    Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit