tax on savings

gareth79

Hi, if i have just become a higher rate tax payer and my wife is a lower rate tax payer what happens to the savings we have in joint names? I.e what rate of tax do we pay on the interest? Higher or lower?

kingmonkey

You pay 40% on half of the sum. You'll have to declare it on your tax return.

Bank will continue to deduct 20%

Lokolo

Half and half. So half the interest is taxed 20% and half at 40%.

withnell

Ideal thing is to open accounts in your wife's name and put all the savings into them, then you only pay 20% tax on the entire balance

gareth79

ok thanks.

i have just started to pay higher rate tax, and only pay it on a couple of k. Ihave never filled in a tax return, will i get this automatically?

Savings are about 10k

Mikeyorks

gareth79 wrote: »

will i get this automatically?

No.

But you do need to advise HMRC if you're definitely (£40835 in 08-09 / £43875 in 09-10) above the 40% threshold. As they need to claw back the extra 20% on Savings interest.

If your tax affairs are relatively simple they may do that with a P810 (single page .... issued every 3 years) rather than enrol you in SA.