Although the basic tax rate is 25 per cent there is a first-step tax band at 20 per cent. Around 4.9 million people pay 20 per cent as their top rate, and about half of them have savings, and have probably paid too much tax.
The 20 per cent band covers the first pounds 2,000 of taxable income. So someone with just a single person's allowance of pounds 3,445 and no extra tax allowance for mortgage interest, married couple's allowance or pensions payments would not start paying the basic 25 per cent rate until their income reached pounds 5,445 in the current 1993/4 tax year.
Anyone with savings in the bank or building society will only be paid interest after 25 per cent tax has been deducted, unless they can register as a non-taxpayer, and receive their interest gross.
So the Inland Revenue is conducting a publicity campaign to persuade those whose top tax rate is 20 per cent to reclaim the extra 5p in the pound tax paid on their savings.
If you paid less than pounds 400 in income tax, you could be eligible to receive up to pounds 100 back for a full tax year. The Revenue has no way of spotting people in this position who pay tax through PAYE.
Taxpayers can reclaim tax for 1992/3 as well as the current tax year.
Inquiries on freephone 0800 210 220.Reuse content