SAIM9030 | Deduction of tax: ‘deposit takers’: bank and building society interest: TDSI

Tax Deduction Scheme for Interest

The obligation to deduct tax from interest payments by deposit takers was repealed from 6 April 2016. This guidance applies only to periods before 6 April 2016.

The duty on deposit takers and building societies to deduct tax is set out in Chapter 2 of Part 15 ITA07 (SAIM9150), and in regulations (SI1990/2232 for banks, and SI1990/2231 for building societies). These arrangements are known as the Tax Deduction Scheme for Interest (TDSI). For tax years 1996-97 to 2007-2008 income tax was deducted at the 20% savings rate. For 2008-09 onwards tax is deducted at the basic rate. The HMRC website contains guidance for deposit takers on the TDSI scheme.

ITA07/S852 allows for the general duty to deduct tax to be disapplied. The above regulations also set out the arrangements under which UK resident individuals can certify that they are not liable to income tax so that they may be paid gross. This is done by completing form R85.

There are web pages on the HMRC website on bank and building society interest, how to reclaim tax under the ‘Taxback’ arrangements, and on form R85. See also SAIM1120.

Non-UK resident individuals, Scottish partnerships, personal representatives and trustees who declare that they are non-resident may receive payments without deduction of tax.