Married Couple Savings Tax Saving Tip

MSE_Martin
MSE_Martin Posts: 8,272
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Money Saving Expert
Did you know? Married couples can save tax on savings? If you’re married and one of you is a higher rate taxpayer than the other, then do make sure all the savings (providing you trust each other) are in the name of the lower rate taxpayer, this way you’ll pay much less tax on the interest saving you money. Very simple and very effective.

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Martin Lewis, Money Saving Expert.
Please note, answers don't constitute financial advice, it is based on generalised journalistic research. Always ensure any decision is made with regards to your own individual circumstance.
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Comments

  • IvanOpinion
    IvanOpinion Posts: 22,153
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    I have recently transferred nearly all our savings into my wifes name and will hopefully reap the rewards when the interest comes out - DW is a housewife and does not pay tax. I trust her implicitly ... but just to be sure ... she does not know the PIN number ;D ;D ;D

    I was discussing this with a friend of mine a few weeks back and he was considering it but he said his wife was on some sort of benefit (invalidity, I think). He therefore thought that transferring money into her name could affect this .... does anyone know any more about this? Is there some sort of limit of savings ? (I like to try to sound knowledgeable about these things when talking to him)

    Thanks
    Ivan
    Past caring about first world problems.
  • dunstonh
    dunstonh Posts: 115,910
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    Good tip. Remember to check how much interest is going to be paid over the year as you could make your partner become a tax payer. I know many cases where people have done this and got caught out and had to pay a tax bill.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Ted_Hutchinson
    Ted_Hutchinson Posts: 7,142 Forumite
    Is there some sort of limit of savings ? (I like to try to sound knowledgeable about these things when talking to him)
    Ivan

    Social security benefit rates

    These Savings and Capital rules apply to Council Tax Benefit Housing Benefit Income Support Jobseekers Allowance
    and not Incapacity Benefit or Disability Living Allowance
    They are set out on page 24 of the GL23 guide linked to above.  As there are different rates for those under 60 and over or living in residential care I'll not repeat a garbled version here. The leaflet only takes a few seconds to download. The explanation of how the DWP treat excess savings (Tariff Income) is worth reading, clearly the DWP have higher expectations regarding return on savings than the most optimistic moneysavers here.
    My weight loss following Doktor Dahlqvist' Dietary Program
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  • System
    System Posts: 178,076
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    OK, a good idea and would save me a lot of money, as I'm higher rate and my wife is a non-tax payer.

    A few questions:

    1. What form do we have to fill in to declare my wife as a non-tax payer and where can we get this from?

    2. How much interest in a year would it take to bring her over the limit and change her status into a tax payer?

    3. Does the same principle work for dividend income? If I transfer the shares we have currently into my wife's name, will she receive a gross dividend payment?

    4. Are there any rules governing the transfer of money in a non-tax payer's account back to someone who is a tax payer? Is there any danger of a tax charge being made then?

    Thanks,

    Balraj
  • DiggingOut
    DiggingOut Posts: 770 Forumite
    re question #1, request the form from the bank, they should have it.

    re question #2, she can earn up to the basic allowance (around £4500, don't remember exactly) without paying tax. But after that, it will be taxed at 20% instead of your 40% up to the higher rate threshold (wherever that is these days, around £30K?). But if she exceeds the basic allowance and becomes subject to tax, you won't need the forms mentioned in #1. Interest will be paid net of tax and she will have to claim it back on an end of year tax return.

    re question #3, I don't know, someone else will answer I assume

    re question #4, as long as you are married there should be no problems here.
    I have five stars! This doesn't mean that I know anything about any of the things I post. I could be a raving lunatic, or a brilliant genius, or just some guy on the internet. In fact, I could be all three at the same time.

    If anything I say makes sense, then do it. If not, don't. Don't blame me or my stars if you do something stupid because I suggested it. I'm responsible for my own stupidity only. You are responsible for yours.

    Why, I don't even have five stars anymore! Aren't you glad you aren't responsible for my stupidity?
  • lisyloo
    lisyloo Posts: 29,560
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    1. I think the form is called R85 and your bank should be able to supply it.

    2. Whatever her personal allowance is.
    It's about £4745 this tax year, so you'd need a LOT of money to have that as income.

    3. I believe that it is all simply treated as income and the same allowances apply (although rates are sometimes different e.g. earnings are taxed at 22% and savings at 20%).
    I believe the answer is yes, she should not have to pay tax on dividends.

    4. If you are married then no.
    If you are not married then yes.
  • lisyloo
    lisyloo Posts: 29,560
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    Was composing my reply when DigginOut posted.
    Not trying to compete ;)
  • robnye
    robnye Posts: 5,411
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    1) you will need to complete a form R85 for each account, that your wifes name is on... if the account is in her name only, she can get full interest (ie not tax taken), if the account is joint, she can half of the interest paid in full

    2)current tax year (04/05) allowance for a single person is £4,745

    3) I believe dividend payments can be taken in the same way as wages, ie total of all interest and dividends received in your wifes name need to be lower than the single persons tax allowance, (but as i dont have any shares, you will need to clarify this)

    4)i am always moving money from one account to another. generally interest is earned on an account in my wifes name (tax free), i may then withdraw the interest and put somewhere else, ie to pay a bill.
    smile --- it makes people wonder what you are up to.... ;) :cool:
  • robnye
    robnye Posts: 5,411
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    lisyloo,

    ditto  ;)

    i guess we arent very busy on friday mornings then...!

    amendment

    just to add, we recently transferred most of our savings into my wifes name (except my isa)...... she was quite tickled by the money being in her name...... and of course i trust her..... ;)
    smile --- it makes people wonder what you are up to.... ;) :cool:
  • DiggingOut
    DiggingOut Posts: 770 Forumite
    Imitation is the sincerest form of flattery! ;D

    If anything I said is wrong, the blame is shared three ways. ;)
    I have five stars! This doesn't mean that I know anything about any of the things I post. I could be a raving lunatic, or a brilliant genius, or just some guy on the internet. In fact, I could be all three at the same time.

    If anything I say makes sense, then do it. If not, don't. Don't blame me or my stars if you do something stupid because I suggested it. I'm responsible for my own stupidity only. You are responsible for yours.

    Why, I don't even have five stars anymore! Aren't you glad you aren't responsible for my stupidity?
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