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Bank charges: Low income savers wrongly taxed

Low income savers are seeing money automatically taken from their account, despite the fact they shouldn't be.

Experts from the Low Incomes Tax Reform Group (LITRG) claim many people whose incomes are less than the average annual tax-free personal allowance are having 20 per cent taken from them savings.

Banks and building societies automatically deduct income tax at the basic rate from the interest paid on deposits.

However, this should not apply to everybody and to stop deductions, low income savers must fill out an R85 form.

These are available from HM Revenue & Customs or from banks and building societies themselves.

LITRG chairman Anthony Thomas said: "It is possible to reclaim overpaid tax after the end of the tax year but it is certainly more cost-effective for the individuals and HMRC if the R85 procedure is used."

He added that many lose out because they do not make a repayment claim in time due to a lack of awareness.

Amir Hussain

Amir specialises in personal loans, consumer debt and debt management.ADNFCR-2776-ID-801577596-ADNFCR

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