how EXACTLY do I transfer money to my partner to reduce my tax bill?

grade15

Hi ALL,
I would like some advice?

I am an employee working for a company on a PAYE system. I am in the upper end of the middle tax band.
My wife is also an employee working for a company on PAYE but she is at the lower end of the middle tax band.
I was thinking of taking on a 2nd job (as unemployment is getting worse in this country, the economy is being flushed down the toilet and my pension will probably be nonexistent when I retire), this would push me up into a higher tax rate band.
a) I would like to know how I exactly transfer my money to my wife to reduce my tax bill?

I read in a previous article by Martin Lewis about the pros and cons of having a company car, it also entails whether to have a lump sum of money/bonus instead of the company car. At the end, he wrote that if you take lump sun of money/bonus instead of the car and warned that if you were in middle tax band and this extra money would take you up into the higher tax band.

b) How can you reduce your tax band from this situation?


Thanks in advance:T

bootman

Car allowance is also taxed, Its counted as income then taxed. Any savinngs you have put in her name so you do not end up paying 40%on them.

grade15

Hi bootman. so is this correct? after i get paid at the end of the month from both my salary(if i take on a 2nd job) I put some of my salary into my wife's account?..how does that save me paying 40% tax?
also with situation b) if I take the lump sum of money/bonus..when I get paid this, the tax will be taken off it already before it goes into my bank account.

Oompa_Lumpa

grade15 - if you earn the money through employment you can't offset any of the tax by "giving" it to your wife - there is no way round this.

When people talk about transferring money to the spouse to reduce the tax they mean on investments and savings, is if you are a 40% tax payer and you have savings, you should transfer them to your wife so that she will pay tax at the lower rate on the interest than you would.

grade15

arhh..thanxs for clearing this up for me.

Gambler

Oompa_Lumpa wrote:

grade15 - if you earn the money through employment you can't offset any of the tax by "giving" it to your wife - there is no way round this.

When people talk about transferring money to the spouse to reduce the tax they mean on investments and savings, is if you are a 40% tax payer and you have savings, you should transfer them to your wife so that she will pay tax at the lower rate on the interest than you would.

Is this okay then, above board?

Thanks

Merrett1

It is totally legal.

It is called tax avoidance which is legal as opposed to tax evasion which is illegal.

If you are not worried that your spouse is going to run away with your money and they are on a lower marginal tax band than you, you should transfer.

Gorgeous_George

I believe you can still do this with a joint account by stating how much of the account is yours and hers. So, if you say 95% of the account is your wife's money, she would pay tax at the lower rate leaving the remaining 5% for you to pay at the higher rate.

Perhaps somebody could confirm - or shoot me down in flames.



GG

oldwiring

http://www.hmrc.gov.uk/manuals/inmanual/html/In0145/04_0008_IN154.htm

http://forums.moneysavingexpert.com/showthread.html?t=792&page=2

You may find the links of use. Joint accounts with spouses are considered not to be held in shares and therefore a declaration is incapable of being made. If I have read the guidance correctly, some form of trust would need setting up with the participants being * in common * rather than joint..

The simple way is for the spouse with the unused allowances to set up a new sole account

Tiggs_2

send your wife out to earn the extra

colinm

Am I right in thinking that if I transfer a chunk of savings to my wife for tax avoidance, these savings will be classed as income to her, and therefore if she's not earning any money (she's a housewife) and the savings are greater than her personal allowance, she will be taxed at the basic rate?

Thanks!