Although some savings schemes and bank savings plans are tax free, such as cash ISAs, generally any interest you receive on a standard bank account has already been taxed on your behalf at the standard rate of 20%.

If you are a non-taxpayer, for example a child, student or a pensioner on a low income, you need to claim that tax back. Even more importantly, you should make sure that in future, you are paid your interest gross.

How Can I Reclaim That Tax back?

First check on your statement that you have had tax deducted. If the entry is marked ‘net interest’ then you will have had 20% deducted at source on your behalf. You need to contact your local tax office to reclaim the tax paid.

How can I Prevent Tax Being Deducted in Future Years?

Ask at your bank for a form ‘R85 – Getting your interest without tax taken off’. It is a simple form to complete and once done you should not have tax deducted in future. If your circumstances change tax-wise you will need to notify your tax office of the change. If you have children who are non-taxpayers, make sure you complete the form on their behalf.

I Pay A Higher Rate of Tax on my Income. What about my Bank Interest?

Once again you have been taxed at source on any interest credited to your account by the bank. The payment you received is net, not gross, and a standard 20% will have been deducted. If you pay more than 20% tax, you should declare the net interest received on your next tax return and the Inland Revenue will tax you the difference which is due.