Low income savers owed £300m

Millions of people are failing to claim their money

By Paul Lewis BBC Radio 4's Money Box

About three million people on low incomes are still owed up to £300m tax which the Inland Revenue took from them, even though they are non-taxpayers.

Despite a two-and-a-half year campaign to give the money back, the Revenue has told the BBC that barely one in four of those owed money has in fact claimed it.

Clare Merrills of the Inland Revenue told Money Box:

"We know that 1.2m people have received refunds since that time.

"It is difficult to say exactly how much we have repaid but we are repaying a lot of money to a lot of people each year."

These figures, which have not been made public before, show that almost three million people are still owed money.

The people affected are pensioners, children, and others on low incomes who have savings in a bank or building society.

Under laws introduced in 1991 the interest those savings earn is automatically taxed at 20%.

Form-filling

Non-taxpayers either have to claim the tax back or apply to have the interest paid without tax being deducted.

But millions of people either do not bother or do not understand the rules.

Adults and children with an income below £4,615 a year, and pensioners with less than £6,610 a year can get the interest paid without tax being deducted if they fill in the correct form.

But many do not.

Alternatively, if tax has been wrongly deducted they can claim it back for up to six years.

Even people with an income of up to £1,960 a year more than these amounts can still claim some tax back, as they should be paying tax at only 10% instead of the 20% that would have been deducted.

Jane Moore of the tax advice charity TaxAid said the amounts were significant:

"This is the sort of case we see every week.

"An elderly widow, 82, she has a small pension of around £4,000 a year and interest on her life savings of around £2,500 a year.

"She has £500 taken off the interest on her savings, but her personal tax allowance is £6,720 a year so she should have paid no tax.

"So she has had £500 taken off that. She should not have paid at all.

"And if the situation has persisted, some years she could go back six years and would have about £3,000 to claim back.

"So the sums are not trivial."

Campaign

In November 2000 the government launched a campaign to explain the rules and give back what it estimated to be £300m to four million people.

But six months later the Revenue decided it was not reaching the people it should. It even stopped collecting the figures.

However, a spokeswoman has told the BBC that just over a million people have made a repayment claim since November 2000.

This leaves about three million who are still owed tax.

Now, two years later, the Revenue says it is planning another campaign, but that will not be ready until the end of the year.

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Anyone who had money in a bank or building society account and has been a non-taxpayer - or only paid tax at the lower rate - in any year since 1997/98 should call the Taxback helpline on 0845 980 0645 to see if they are owed money.

BBC Radio 4's Money Box was broadcast on Saturday, 24 May, 2003 at 1204 BST.