Moving savings to avoid paying higher rate tax

kkgree1

I have searched the forums about this but not got a definitive answer.

My husband is well into the higher rate tax band for 2011/12. We had not realised until recently that we were meant to pay higher rate tax on any savings he has in his name. He is keen to avoid having to do a self assessment tax return.

We have around 4 - 5 savings accounts (excluding ISAs), some in his name only and some in a combination of joint names. Is it legal to change all the accounts to my name only to avoid having to declare them for tax purposes? I am a basic rate taxpayer.

I understand we could offset some of his pension contributions against it if necessary but that seems like a complicated route to go down.

Any advice gratefully received. Thanks.

opinions4u

Completely legal.

His only concern is that the money becomes yours and you might run off with it .

dzug1

Yes it's legal.

But remember it's not just a change of name, it's a change of ownership. It's no longer 'his' money or 'our' money - but yours

mjmal51

If he is already in the higher tax rate for this tax year then he is obliged to declare interest earned so far this year even if the money is transferred to you today.
That interest is taxed at 40% and he will already have had 20% deducted by the bank.

jamesd

Having savings interest does not mean automatically having to file a self-assessment tax return. Just call the tax office or send them a letter telling them the gross and net of basic rate tax interest income for each tax year. No hassle likely if it's going back a few years. On the phone he's likely to find them friendly and helpful. They will adjust his tax code to collect the tax that is due.

It's entirely legal for him to give you all of his savings account money and it will then be taxable income for you. Money in joint accounts is normally treated as owned 50:50 and while alternatives to that can be done it's cleanest just to move the money into accounts in your sole name.

Some banks may be reluctant to just change an account from joint to sole name or vice-versa because of confidentiality issues. New accounts are the solution.

If you're not both using all of your ISA allowance, including the S&S part, say so and people can mention some investments of moderate risk levels that pay interest and may be acceptable even to people who generally prefer savings accounts.

Interest paid out in the tax year in which the money is split and where ownership is his is still going to be taxed as his (or as half each for joint accounts). Moving the money to sole accounts makes life easier because the statements of interest paid in the tax year for the old accounts will be his or joint. The new ones will be just for you. That makes it very easy to work out how much interest income he has to declare for this year.