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Big banks let down their low income customers

Published on 14 April 2004

Big banks badly let down their low income customers. This is the conclusion of a review undertaken by the Low Incomes Tax Reform Group. A mystery shopping exercise in over 50 branches revealed that only 20 could provide an up-to-date registration form to prevent the banks deducting excessive tax. Not a single bank put the form on display or provided obvious publicity to warn their customers that they may be paying too much tax.

The tax system requires banks to deduct tax at 20% from the interest arising on bank deposits. However, if the individual taxpayer is on too low an income to pay tax they can complete a registration form (a form R85) that they can get from their bank and no tax is then deducted.

If they do not do this they have to claim back the tax from the Inland Revenue and many thousands of low income customers are either not aware of this or do not bother.

The Treasury and the banks may benefit from this, but not the poorest customers.

It is therefore important that banks:

  • Tell customers that they can register to have no tax deducted
  • Make it easy to obtain a registration form
  • Have the latest version of the form, as the tax exemption levels change every year


In March 2004 we visited 52 branches of the Big Four banks (RBS/Nat West, HSBC, Barclays, Lloyds/TSB) scattered throughout the UK.

In no branch did we find a poster prominently informing customers of their ability to register.

In no branch could you easily obtain a form by taking one from a display, despite all branches having an array of leaflets selling a variety of products. All branches made you queue to get one.

Despite the Inland Revenue repeatedly asking the banks to stock the latest forms we found that fewer than 40% of banks could provide an up-to-date form. In our statistically small sample we found that Barclays and the Nat West were particularly poor.

Out of date forms can mislead customers and deprive them of the opportunity to stop tax being taken from them.

We have asked banks in the past to remedy these failings but it does seem that, when it comes to the poorest of their customers, such pleas fall on deaf ears.


Contact Name: John Andrews (Tel: 0844 579 6700, Fax: 0844 579 6701)

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