Answered by Mufti Muhammad Taqi Usmani
As a self employed person working in the main for UK public departments, my earnings are all paid directly into a UK bank account. As these sums build up, interest is accrued in the usual way. UK Income Tax does not fall due on these earnings until the following taxation year. By this time the accrued interest can be considerable. Whilst I fully appreciate that to have the benefit of this interest in any way, shape or form in not permitted, there seems to be some momentum gathering in favor of the view, that interest can be applied towards taxation. I would be greatly indebted if you would be kind enough to shed some light [or dispel the darkness] on this issue.
If the amount is deposited in a private bank the interest received there from cannot be used for the payment of taxes to the government. However, if the money is deposited with a bank wholly owned by the government, only that part of the taxes which is unjust or excessive can be paid by the interest received from a government bank.