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Married Couple Savings Tax Saving Tip
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# 1
MSE Martin
Old 02-07-2004, 4:29 AM
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Default Married Couple Savings Tax Saving Tip

Did you know? Married couples can save tax on savings? If youre 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 youll pay much less tax on the interest saving you money. Very simple and very effective.

To discuss this or ask a question click reply
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# 2
IvanOpinion
Old 02-07-2004, 11:03 AM
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Default Re: Married Couple Savings Tax Saving Tip

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
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# 3
dunstonh
Old 02-07-2004, 12:28 PM
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Default Re: Married Couple Savings Tax Saving Tip

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.
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# 4
Ted_Hutchinson
Old 02-07-2004, 12:43 PM
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Default Re: Married Couple Savings Tax Saving Tip

Quote:
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.
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# 5
Old 02-07-2004, 1:06 PM
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Default Re: Married Couple Savings Tax Saving Tip


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
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# 6
DiggingOut
Old 02-07-2004, 1:14 PM
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Default Re: Married Couple Savings Tax Saving Tip

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.
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# 7
lisyloo
Old 02-07-2004, 1:17 PM
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Default Re: Married Couple Savings Tax Saving Tip

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.
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# 8
lisyloo
Old 02-07-2004, 1:18 PM
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Default Re: Married Couple Savings Tax Saving Tip

Was composing my reply when DigginOut posted.
Not trying to compete
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# 9
robnye
Old 02-07-2004, 1:19 PM
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Default Re: Married Couple Savings Tax Saving Tip

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.
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# 10
robnye
Old 02-07-2004, 1:20 PM
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Default Re: Married Couple Savings Tax Saving Tip

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.....
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# 11
DiggingOut
Old 02-07-2004, 1:34 PM
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Default Re: Married Couple Savings Tax Saving Tip

Imitation is the sincerest form of flattery! ;D

If anything I said is wrong, the blame is shared three ways.
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# 12
Old 02-07-2004, 1:40 PM
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Default Re: Married Couple Savings Tax Saving Tip


Thanks everyone for the answers, much appreciated.

At the moment, I get about 800 a year in interest and 200 a year in dividends (gross), so that makes us easily under the tax allowance.

Balraj

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# 13
isasmurf
Old 02-07-2004, 10:26 PM
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Default Re: Married Couple Savings Tax Saving Tip

Just to add a couple more things to the answers already posted.

Quote:
1. I think the form is called R85 and your bank should be able to supply it.
It is also available from the Inland Revenue website here

Quote:
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.
If your interest totals less than 4745 then you shouldn't pay any tax (by filling out a R85), if your interest totals between 4,745 and 6,765 you will only pay 10% tax, but tax will be automatically deducted at 20% so you will need to reclaim the additional 10% back at the end of the year by filling in a form R40. Anything over 6,765 is taxed at 20%. It is also worth noting that is savings interest is your only source of income and it comes more than your personal allowance it will probably all be taxed, so you will still be due some tax back. I don't think there is anyway around this.

All this probably sounds very complicated, but I'm told there is a helpsheet where you can work out how much tax you should pay on your savings coming out at the end of the month together with a new R85 form and a new leaflet on Bank and Building Society interest as part of the Inland Revenue's latest taxback campaign.

Quote:
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.
There is only an advantage if you are a higher-rate taxpayer. Dividend tax credit is deducted at source and is not reclaimable (even for non-taxpayers). Highre rate taxpayers need to declare this on the tax return and pay extra, so there is an obvious advantage there. However passing all your shares to a non-taxpaying spouse may not be the best thing to do as you also need to tax Captial Gains Tax into consideration. It may be better to share equity between the two of you to take full advantage of two lots of Capital Gains Tax allowance (one for each partner).

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# 14
lisyloo
Old 02-07-2004, 10:53 PM
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Default Re: Married Couple Savings Tax Saving Tip

Quote:
It may be better to share equity between the two of you to take full advantage of two lots of Capital Gains Tax allowance (one for each partner).
I don't think CGT is an issue.
You can always transfer back before selling.

Obviously only worth doing for dividends if you are 40% tax payer.
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# 15
Old 08-07-2004, 10:07 PM
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Default Re: Married Couple Savings Tax Saving Tip

Why is this described as a money saving tip for married couples? Does it not apply to any two (or more) people who trust each other enough to re-distribute their savings between themselves in a tax-efficient way? Or would there be tax of some form liable on the transfers of money between the individuals if they are not married?
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# 16
Pal
Old 09-07-2004, 1:20 AM
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Default Re: Married Couple Savings Tax Saving Tip

If you are not married there are tax implications:

- Inheritance tax if you die within 7 years of transferring any cash;

- Capital gains on any shares you transfer (it is counted as a disposal).

Does anyone know if you have to pay stamp duty on shares transferred between unmarried couples (or anyone else for that matter).
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# 17
MJSW
Old 09-07-2004, 2:26 AM
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Default Re: Married Couple Savings Tax Saving Tip

Quote:
Does anyone know if you have to pay stamp duty on shares transferred between unmarried couples (or anyone else for that matter).
No, not if they are a gift. However, if you were to sell them then Stamp Duty is payable.
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# 18
MSE Martin
Old 09-07-2004, 4:29 AM
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Default Re: Married Couple Savings Tax Saving Tip

Also if you're not married then it is arguable that if you were to give someone 10,000 let them earn interest and then they later gave it back for you to use - this is deliberate tax evasion.

Martin
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# 19
gallic
Old 09-07-2004, 1:30 PM
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Default Re: Married Couple Savings Tax Saving Tip

Help please!

Where do married couple joint accounts fit into this equation with tax relief?

Can you simply declare on your tax retrun that all or most of the savings belong to the lower rate tax payer or are separate accounts the only way to gain the benefit?
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# 20
Finney
Old 09-07-2004, 1:35 PM
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Default Re: Married Couple Savings Tax Saving Tip

Equally effective I find, is to open an account on-line where your partner is a technophobe! Be careful to let someone else know the pin numbers, or in the event of an untimely death, the money could be lost.
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