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

dzug

colinm wrote: »

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!

No you are wrong. The savings will not count as income - but the interest on them will.

jennifernil

I have no earned or pension income. My husband is a taxpayer.

He earns the money and I save it (or at least the bit I don't spend!) in an account in my name.

I pay no tax on the interest as it is covered by my personal tax-free allowance. The only joint account we have is our current account.

I can get a better return than having it in an ISA, but we do both have ISAs as I may become a taxpayer one day.

bobby-boy_2

grade15 wrote: »

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.

Hi Grade 15 just a thought you say you have a pension scheme if you do go into 40% tax remember to get your contributions grossed up as if it is with your employer he will only be grossing up the 20% (08/09 values) as he may not know about your second job.

If you pay 40% you might as well get something back.

colinm

Thanks Dzug and jennifernil - this is very useful!
I will transfer some savings over to her now - wish I'd done it years ago instead of paying tax on my interest!!

However...one other thing occurred to me - what about capital gains tax? I don't really understand what this is, but would she get stung for it if I transferred money over to her in one lump (we're not talking tens of thousands here (I wish!) - less than 10k).

fengirl_2

CGT is only payable when you dispose of an asset such as a property, shares or antiques. Disposing of cash does not constitute a Capital Gain, but it does count for IHT, although transfers between spouses are exempt.

roddydogs

Be very wary of tranferring money to Spouse/partner -are you 100% sure you wont split up?

colinm

roddydogs wrote: »

Be very wary of tranferring money to Spouse/partner -are you 100% sure you wont split up?

lol...yes, very good point Roddy...and I don't think anyone can be 100% sure of what will happen in the future! But I'm prepared to take the risk...I'll just quickly get the cash if things start to go on the rocks

Thanks to fengirl for your advice

roddydogs

Yes, but lets put that in practice (i speak from experience) youv had a blazing row, for example, a few day later, you say to your other half "you know that £xxxxx pounds ive got in you name, can i have it back"
"Why do you want it back then"?

Lunar_Eclipse

roddydogs wrote: »

Be very wary of tranferring money to Spouse/partner -are you 100% sure you wont split up?

In reality it shouldn't really matter if you are married since you are both still legally entitled to (a share of) the money anyway, regardless of whose name it is in. All assets will be divided as part of a separation/divorce.

Of course that doesn't mean someone couldn't go on a spending spree.

At the end of the day though relationships are about trust and personally I doubt I would be worrying about <10k of savings should this life changing situation happen. But of course others may feel differently. (Not trying to dismiss the 10k btw. Well done!)

IMO it makes sense in this instance to transfer the money and negate the tax. I would just ensure paper statements were kept and filed in a central place in the house along with everything else (we have a filing cabinet.) But ultimately everyone needs to do what is right for them. :cheesy: