Age tax allowance for 65 yrs old

loulou41

I understand the age tax allowance will be reduced if your income is £19500 in a year. Hubby will be receiving state pension in a few months and if interests from his savings are counted, he will be over that limit. Is there anything he could do, I was thinking, may be he should have a joint account with his daughter, will that help. also is the £19500 limit before or after tax, if it is after tax, he should be OK? Thanks

ctm_2

The £19500 is the limit for the current year. For every £2 over this the age related part of the personal allowance is reduced by £1.

The £19500 is total income before tax.

o_t_e

Hi - is there a particular reason why you suggest having the savings in a joint account with your daughter? What I'm getting at is have you considered having the savings held either jointly with yourself or solely in your name?
To answer your question - if it was joint account he would be deemed to have received half the account interest so it would help.

loulou41

The reason for having joint account with my daughter is for the interests from the savings to be halved. Also if something happens to him, daughter could withdraw half of the money from the account as I understand if it is in his name, the account will be frozen and that might cause a few problems if they need cash. I have my own reason for not having a joint account with him as I want to do mine with my son for the same reason. We only have a joint current account and does not keep much in it approx £1000. Does this make any sense? I also want him to have an account in his name in case of emergency. Total income of £19500 does it seem a lot and I do not think it is fair that gross interests from savings are counted as well. thanks for all your help.

dunstonh

Is there anything he could do, I was thinking, may be he should have a joint account with his daughter, will that help. also is the £19500 limit before or after tax, if it is after tax, he should be OK? Thanks

There are investment products which provide income which do not go towards the age allowance. It may just be a case of altering your investments a little.

o_t_e

It's worth mentioning that if your husband will start receiving his pension 'in a few months' then that will be in the next tax year. The full age related allowance for that year is £7280 and the income limit to receive this in full is £20100 rather than the £19500 of this year.

loulou41

Thanks, he will still be above the £20100, he has already invested in products that do not go towards the age allowance e.g isa. He is going to add his daughter's name on his account, but I am just wondering if he has done that and something happens to him and should he die, will the daughter as joint owner be able to continue to use his account after his death. For inheritance tax purposes, what date will be taken into account, is it when the additional holder name has been added as he has this account for ages in his sole name? It's just I have read that when the bread winner dies and his account is frozen then the family suffers and I want to make sure this does not happen to my children and am thinking ahead, a bit morbid though. Thanks

o_t_e

I'm afraid I'm not sufficiently knowledgable to comment on the joint bank account situation but I'm sure the bank themselves could advise prior to adding your daughters name.
With regards the age allowance it's worth mentioning that if your husbands personal income is sufficiently high his allowance at 65 can only be reduced to the level it was at whan he was 64 ie 4895 in this tax year or 5035 in the next tax year. If his income is over £24590 his personal allowance will be 5035; compared with the maximum 7280 he will pay the tax of the difference is (7280-5035) at 22% = £493.90. It's far from desirable certainly, but his income would have to increase by £4490.00 to warrant paying this amount.

dunstonh

ISAs are not the only investments which reduce impact on age allowance. So there is more scope to reduce income from savings/investments if it is those causing the increase.

margaretclare

I've been reading this with interest. And I thought: Ooooops, have just worked out that our combined income in the coming financial year will be just short of £25,000.

BUT that doesn't come to just one of us. We get our pensions, annuities etc separately. His totals £12,500, mine is just over £12K.

The OP mentions her husband's income being £19,500. But she doesn't mention her own?

And FWIW the only joint account we have is one between us to pay all household expenses by direct debit, we both tip into it. This is just so that if/when one of us departs this mortal coil, the one left behind won't find the electricity cut off or something similar.

Aunty Margaret

o_t_e

Hi Aunty Margaret - if you are both over 65 you are each entitled to receive £19500 before any reduction in your personal allowance and so you should both be entitled to the maximum age-related personal allowance - £7090 this year, £7280 next tax year, or if you are 75+ £7220 this year, £7420 next tax year.