The government announced that it will introduce a new tax-free savings account called “Savings Account”, where people can deposit money into an investment vehicle without paying taxes.
This form will allow you to make deposits up to R1 million per year, and withdrawals are allowed every month. There is no limit on the amount of money you can put into the account, and there is no requirement for a minimum balance.
Interest earned on the funds is tax free if you do not exceed R1 million in annual earnings.
There is no fee for opening the account, and there are no fees for making regular deposits and withdrawals.
The government says that the Savings Account will be introduced in phases over the next three years, starting with the introduction of the first phase in July 2020.
What is an R85?
An R85 form is available for people who earn less than £10,000 per annum. This form allows you to benefit from tax relief on interest paid to certain types of bank account.
Interest earned on cash ISA’s and stocks & shares ISAS will not qualify for tax credit.
Why do you need a R85 form?
An R 85 form is a document we use to tell HM Revenue & Customs (HMRC) how much money we earn per year.
If you are claiming tax relief on your income, you must complete an R 85 form each year. You do this by filling it out online, and sending it to HMRC.
What is the tax-free allowance for each person?
The tax free personal allowance varies depending on which country you reside in. In the UK there is no upper limit for the amount of money you can earn without paying income tax. However, if you make over £11,850 ($14,500) a year you must pay National Insurance contributions. If you are aged 65 or older, you do not have to pay National Insurance contributions. You can find out how much you owe here.
There are different limits for pensioner, student, and self-employed individuals. If you are retired, you cannot work and receive payments such as pensions, disability benefits, or unemployment insurance. This is because you are considered to be earning enough money already. Students do not qualify for the tax free personal allowance unless they are studying full time and receiving financial aid. They do not count towards the annual earnings threshold. Self-employed individuals are required to report their earnings to HMRC every month.
Can I only register an R85 for my own account?
A child’s account when you’re the guardian or parent of the child.
If you are supporting a saver who has reduced capacity yourself.
You can only use one account per person.
The maximum amount that can be deposited into the account is R1,500.
There is no limit on the number of accounts that can be opened under your name.
For example, if there are three children, each of whom has an R85 savings account, you can open up to six different accounts.
However, if you want to deposit money into the same account, you must do it separately for each child.
What do I need to know to fill out a R85?
Fill out an R85 if you earn over $5,500 per month and are not entitled to a tax offset. You must provide proof of your income and assets.
A simple number comparison will tell us whether or not we should accept your application. We use a formula based on the following criteria:
• Your total monthly income less allowances
• How many people live in your household
• What type of property you own
• Whether your main residence is rented or owned
If you have multiple accounts, we will consider each one separately.
You will receive an email confirming receipt of your application. Please note that we cannot process applications without receiving confirmation of your identity.
What happens next?
Interest payments will begin to arrive on April 5th. This includes any interest earned on savings accounts, current accounts, ISAs, bonds, shares, money market funds and cash deposits. If you are owed interest, it will start arriving in your bank account on April 5th.
If you paid too much tax on interest income in previous years, you might be able to reclaim some of this overpaid tax. However, there are strict rules about what you can do and how long you can wait.
You must pay tax on the interest you earn in each individual year. So if you earned £100 of interest in 2017/18, you will owe tax on that amount.
The government changed the law in April 2018 to allow people to reclaim up to £1,000 in overpaid tax. But the deadline for claiming this relief expired in November 2018.
So if you want to make sure you don’t miss out on this opportunity, you’ll need to act quickly.
What if my annual income goes up after I fill out a R85?
The taxman wants you to know what happened to your money. If you’ve ever claimed back money from your employer’s contribution towards a pension fund, it could be because you’re about to receive some good news. In fact, the South African Revenue Service (Sars) has just announced that it will soon introduce a new form called IF17, which will allow taxpayers to reclaim money previously paid into a retirement scheme.
IF17 replaces the old Form P1, which was used to calculate the amount of money you had already contributed to a pension plan. Sars says that the introduction of IF17 will help simplify things for employers and employees alike.
In addition to simplifying the process, IF17 will also make it easier for retirees to claim back the money they have already paid into a pension fund. As long as you have submitted your tax returns for the previous four years, you are eligible to file an application for the refund. However, the deadline to do so is April 30 next year.
If you don’t want to wait until next year to claim back your money, you can still apply for the refund now. You simply need to fill out the new form – IF17 – and send it to Sars along with your tax returns for the preceding four years.
Frequently Asked Questions
Do I pay tax on my savings interest because it exceeds the PSA?
The introduction of the Public Sector Annuity Scheme (PSAS), which came into effect in January 2017, meant that banks and building societies could stop deducting 20% tax on interest earned on savings accounts. This change had been anticipated since the PSAS was introduced, but it did cause some confusion among consumers about whether they needed to file an R85 form to claim their interest on savings accounts.
HMRC clarified what happens to interest earned above the PSA threshold in response to questions from our readers.
In short, most people do not need to take action unless they are a taxpayer. Tax is withheld from interest payments on savings accounts, regardless of how much you earn. If you are claiming tax relief on your pension contributions, you must continue to make those claims even if you reach the PSA threshold.
If you are not a taxpayer, you do not need to file an R85 to claim your interest on savings accounts. Your savings account provider will send you a statement showing you how much interest you received during the period covered by the statement.
You can check if you are a taxpayer by logging onto the HMRC website and entering your National Insurance number and date of birth. If you are a taxpayer, you will see a box indicating that you are a taxpayer. If you are not a taxpayer then you will not see the box.
In addition to interest on cash savings accounts, what else is classed as savings income?
The UK government announced changes to how it calculates tax relief on interest earned by individuals on their savings accounts. The change affects those earning less than £16,240 per annum and those whose savings are held in certain types of account.
Savings interest is generally exempt from taxation under Section 18 of the Inland Revenue Act 1984. However, there are exceptions to this rule. For example, there is no exemption where you earn interest on cash savings accounts. You must pay basic rate tax on the amount of interest you receive.