How do you avoid higher rate tax on savings interest

silentfox

jem16 wrote: »

You are correct from that point of view.

However I read it, and obviously Mikeyorks too, that you meant transfer your actual salary to your wife - your wording was ambiguous.

Ok I am confusing you guys, sorry. I do intend to transfer the salary to my wife so you are understood correctly.

But before I transfer it or receive it , the salary will already have been taxed at the higher rate, so on transfering the already taxed salary to my wife who lets say has a high interest account in her name, the interest that she then earns on my salary which is now in her account will only be taxed at the basic rate. I therfore have no further tax to pay? Hope I haven't confused you more.

oldfella

the interest that she then earns on my salary which is now in her account will only be taxed at the basic rate. I therfore have no further tax to pay?

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correct - and if she earns less than around £8300 then a proportion of the interest will be at 0% or 10%.

jem16

silentfox wrote: »

Hope I haven't confused you more.

No problem - I'm with you now.

Initially when I read it I thought you meant you were trying to avoid paying higher rate tax on your salary by giving it to your wife.

KiKi

Sorry if this is a stupid question.

I earn in the 40% bracket and am taxed as such through PAYE. But I have never filled in an assessment form to declare interest on my savings. I have always assumed - perhaps incorrectly - that because the bank has my NI number, that any 40% tax on interest is taken automatically, just as the 20% is if you're in that bracket.

Maybe it's the way I'm interpreting it, but it seems that a couple of people are saying that if you earn in the 40% bracket, and are taxed on your salary as such, that you have to fill in a self assessment form to tell HMRC how much you have in savings so they tax your *savings interest* correctly? And it's not automatic through your account that has your NI number?

I work for a public body and am taxed through PAYE etc, no self-employment or anything.

Would appreciate it if you were able to enlighten me because I'm rather shocked if it's the case that it's news to me!

Cheers.
KiKi

jem16

KiKi wrote: »

Maybe it's the way I'm interpreting it, but it seems that a couple of people are saying that if you earn in the 40% bracket, and are taxed on your salary as such, that you have to fill in a self assessment form to tell HMRC how much you have in savings so they tax your *savings interest* correctly? And it's not automatic through your account that has your NI number?

You have to declare your savings interest to HMRC yourself. Better get onto the phone to them. You may not need to fill in a full self assessment form - they may just adjust your tax code.

By the way normal savings accounts don't require a NI number. ISAs require a NI number but these are tax free and don't have to be declared.

KiKi

Hi there Jem

Thank you for the information.

I am utterly gobsmacked. Purely because I had absolutely no idea that you had to declare interest on your savings as a higher rate tax-payer. I'm not defending ignorance of these things in any way - but I can honestly, honestly say that I have never seen this mentioned / advertised. If all you do is get paid by your work, open a savings account and stick your money in there, how would you know to do that? I wonder if perhaps I missed something along the way?!

I'm an intelligent person, and I'm pretty savvy about this stuff - or maybe I'm just living in a savings-interest bubble...?! Surely there must be someone else out there who didn't know?!

Please?!

Yours, truly shocked (and clearly ignorant)
KiKi

jem16

KiKi wrote: »

I wonder if perhaps I missed something along the way?!

It's mentioned on here quite often ,especially in the Tax board but perhaps you haven't read there?

Other than that I think you are just expected to make yourself aware.

KiKi

No, I never read the tax board.

I'm really thinking, too, about people who don't read up on anything financial, except for the T&Cs of accounts that they open!

Thanks again, though.
KiKi

jem16

KiKi wrote: »

No, I never read the tax board.

Time to start reading there - you might find some pointers as to how to avoid paying that extra 20% on your savings. I hate having to do that and usually pay extra into my pension to avoid it.

I'm really thinking, too, about people who don't read up on anything financial, except for the T&Cs of accounts that they open!

Some people never read the T&Cs either.

KiKi

jem16 wrote: »

Time to start reading there - you might find some pointers as to how to avoid paying that extra 20% on your savings. I hate having to do that and usually pay extra into my pension to avoid it.



Some people never read the T&Cs either.

Oh, gosh, ain't that true!

On the savings front, I offset all my savings with tax-free interest against my mortgage, anyway. So the interest issue would only apply to a very very small amount that I keep in a high interest savings account elsewhere.

However, I shall hop onto the tax board and most certainly check it out!

Cheers
KiKi