Avoiding 40% tax on interest if wife not earning?

Mikeyorks

laticsforlife wrote: »

I suspect that if (and its a very big if) HMRC decided to look at your income and savings, and then at your wifes, and saw that you earn it and she gets interest (tax free) then they would suggest you were avoiding YOUR tax liabilities.

Can you post some data to support that fairly ludicrous allegation?

laticsforlife

Which bit - it is highly unlikely that if the OP did this that anyone would ever be any the wiser.

or that it's his income and its not having tax deducted from it as savings income.

I said thought, so it may be OK, but it doesn't sound right to me, like MP's making legit claims but still sounding very dodgy.

Mikeyorks

It's perfectly legitimate - you were suggesting otherwise - to make the best use of your OH allowances, by placing savings in his / her name. That applies whether the OH isn't a taxpayer ..... or is in the 20% band whilst the other partner is at 40%. I fully maximise my OH's unused allowances ... it is in no way even dubious.

The only downside is they may do a runner ... as it becomes their funds. But that is the only downside ... it has absolutely no parallel to expenses.

John_Pierpoint

Mikeyorks wrote: »

Can you post some data to support that fairly ludicrous allegation?

Once upon a time grand parents were able to give income to their grand children and reclaim the tax.
Parents are not allowed to transfer capital into their children's names and allow the children to reclaim tax until they are adults (or married?).
Husband and wife businesses have been challenged to the highest courts in the land.
(Arctic Systems).
With the country and government deeply in debt, I don't think any taxation concept is ludicrous. Be warned there must be a team thinking up new taxes as we speak.
(Buy gold coins while you still can legally?)

lohr500

OK, one more question on this.

If the account were opened in joint names to ensure £100k protection in the event of a bank collapse, then can the interest still be taken at a gross level by one of the joint a/c holders?

West Bromwich currently have the best 1 year access a/c but to ensure full protection on £100k it would need to be a joint a/c.

Thanks

RayWolfe

No, you can each take out 50K, but if you do want a joint then submitting an R85 for your wife will give you 50% gross.

lohr500

So the only solution to protect £100k savings and to get gross interest for my wife as a non earner is to open two separate accounts, each for £50k, with non linked institutions?

If I understand correctly RayWolfe, with a joint a/c the revenue assume that a completed R85 will only apply to half of the interest?

Mikeyorks

No - you're each protected up to £50k with individual accounts ... in the same institution. Or a joint account, with £100k, affords the same protection.

If I understand correctly RayWolfe, with a joint a/c the revenue assume that a completed R85 will only apply to half of the interest?

..... HMRC assume that the interest is apportioned 50:50 in such cases. In your circumstances only your wife could submit the R85 and then, what you say, will basically apply. Except .... a number of Institutions will not accept a singleton R85 against a joint account .... as their software can't cope.

So - all things being equal - it's generally more practical to go for the individual accounts as no issues with the R85 then. Only issues with lots of shoes & handbags .... if your wife has a penchant for them (Ray would normally add that - so thought I would do it for him!);)

But if your wife's personal allowance will stand the interest on the whole £100k .. as rates inevitably rise? Then separate institutions are advisable.

RayWolfe

Mikeyorks wrote: »

Only issues with lots of shoes & handbags .... if your wife has a penchant for them (Ray would normally add that - so thought I would do it for him!);)

Or toyboys!

lohr500

You've obviously not seen my wife then!!!!!

After a few hours searhing for a/c with reasonable interest I have identified the Investec High 5 as a possibility. 90 day notice but can live with that. And the Ulster Bank 3.46% deal with conditions.