Tax Advice please?

Cacran

The situation is.....

I work only 7 1/2 hours a week and earn under £60 a week. I pay no tax or NI contributions. I declare myself a non tax payer for savings and have enough NI stamps on for me to qualify for a full pension. I work for local education and pay into a pension scheme from my wage which will not amount to much in the long run. I am 53.

My husband took redundancy in June 08. He got a pay out, and a pension lumpsum and £100 a week company pension. He has enough NI stamps to qualify for full pension. He is 55.

As it stands, my husband's intention is not to work again. His family have all died young and although he is healthy at present, he has always worked very hard and always intended to retire at 55 if at all possible. When the opportunity arose, he took it. His brother and mother had just died and she'd begged him to leave his job at a large Chemical Plant, where his brother died doing the same job. Thus, he did. (Please don't anyone think that this is a lazy move as he works hard around the home and in our allotment!)
He pays no tax on his pension but still pays tax on his savings interest.

We used to have the bulk of our savings in my name to avoid extra tax. Now we have more savings, doing that would make me over the tax limit so that I would be taxable.

We moved a lot of the money to his name, still some in mine. As we are getting older, this may not be a wise move. As our income combined is not that great, is there a way we could combine our tax entitlement?

Our intention of living off the interest on savings could be quite difficult now as interest rates have dropped so much.

I could do with having a review with an IFA but have been misguided so many times that I like to sort my own things out with the help of this site (which is great!)

Sorry for the long explaination!!!

CLAPTON

you can't combine you tax allowances

however you can
-make maximum use of tax free ISAs
-consider other tax free saving like NS index linked certs
-work out exactly your incomes and rearrange your saving so that you pay the least (or no) tax.


you are rather young to retire and live on savings as inflation eats into the capital. however as long as you have worked out what you need to live on and what your income will be then maybe it will work out. But do take inflation inot acccount... even when interest rates were higher the 'real' after inflation return was generally only about 1%

Mikeyorks

...... and don't forget that, for each of you, there's a 10% (Savings only) tax band which reaches £2320 above your Personal Allowances.

From the info posted ..... you should each have availability of the whole of that band .... as your earned income sits within your PAs? So the residue of your PAs is available at 0% against interest and then £2320 each at 10% .... before reaching up to 20%.

Juggle the savings to make best availability of the 10% band. But if you do go into it then don't forget you do have to pay the tax and then reclaim after 5th April? You can't have R85s in place if you've reached into the 10% band.

medic1

is there an article that tells us what to do with our savings since the rates have gone down i used to invest in money markets but now my savings have plumted what si the most tax effective way to save?

feisty1

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/SavingsAndInvestments/index.htm

Cacran

Mikeyorks wrote: »

...... and don't forget that, for each of you, there's a 10% (Savings only) tax band which reaches £2320 above your Personal Allowances.

From the info posted ..... you should each have availability of the whole of that band .... as your earned income sits within your PAs? So the residue of your PAs is available at 0% against interest and then £2320 each at 10% .... before reaching up to 20%.

Juggle the savings to make best availability of the 10% band. But if you do go into it then don't forget you do have to pay the tax and then reclaim after 5th April? You can't have R85s in place if you've reached into the 10% band.

I am trying to get my head around this!!!

So what you are saying is that on top of our personal allowances (the one which the IR send out in a letter every now and again with the new tax code) there is an amount of £2320 each that can be earned as interest at 10%. Over that would be 20%. With most savings interest tax is deducted at the bank so does that mean we can claim some back at the end of the year from IR?

eg. (no figures are relevant) Tax allowance 10,000 but only use £700 of it in earned income..... Interest on bank, first £300 tax free, next £2320 at 10% tax, over that 20% tax.??????

Sorry for being a pest, I need it in small bites as I cannot always take everything in at once (my age!!!!LOL!):beer:

jem16

Cacran wrote: »

I am trying to get my head around this!!!

So what you are saying is that on top of our personal allowances (the one which the IR send out in a letter every now and again with the new tax code) there is an amount of £2320 each that can be earned as interest at 10%. Over that would be 20%. With most savings interest tax is deducted at the bank so does that mean we can claim some back at the end of the year from IR?

Yes it does.

eg. (no figures are relevant) Tax allowance 10,000 but only use £700 of it in earned income..... Interest on bank, first £300 tax free, next £2320 at 10% tax, over that 20% tax.??????

I assume you meant to say, first £9300 tax free and so on. But yes you have the right idea.

CLAPTON

I can't understand your figures....

but if someone earns e.g. 5,200 per annum gross from a pension or job and also has (non ISA) saving interest then it would work like this

pension / salary 5,200
tax free allowance 6,035

so pension/ salary has no tax deducted

then that leaves 835 tax allowance unused
if the savings gross interest is less than 835 then you can fill in R85s and have the interest paid tax free as source.

however if the gross interest is greater than 835 you are not allowed to receive the interest gross
so it then goes
the first 835 of interest is tax free
then the next 2320 is taxed at 10%
then the rest is taxed at 20%

in this case you would have to reclaim the overpaid tax from the HMRC at year end.

Cacran

Yes that is what I thought. Just hard to try to put it into words.