Savings tax affecting income tax - help?

cheerfulcat

Bumpy wrote: »

All the advice here, well intentioned as it is, is either confusing or not relevant.

That's partly because you haven't given us an awful lot to go on! But TBH I think that your situation is too complex a one for anyone here to be able to help and I would suggest that you get yourself a chartered tax adviser, here. The tax office can help you with what you owe but the CTA can help you to make that less...

EdInvestor

We are very fortunately recieving £100,000 to invest and have the interest.

It seems that in fact you aren't receiving 100k to invest at all.You are just receiving a gift of someone else's income.

There is no tax on gifts,IIRC? (There is no IHT on gifts from income either, which may have something to do with it!)

StevieJ

Bumpy wrote: »

Sorry if I'm being stupid - why £37,000 not £33,000?

By gross earnings do you mean what I earn before any tax (and NI etc?) is taken off?

You are allowed to earn 37,435 before paying higher rate tax, that is 32,400 +
5035 ( personal allowance) this relates to the current tax year 2006-2007, from
April6th this will be 38,525.

Gross earnings are your earnings before deduction of tax and NI THIS also includes unearned income (interest/dividends) with the tax (deducted at source) added back.

Reestit_Mutton

bristol_pilot wrote: »

You say 'we' will be getting interest on £100k. Who does the interest belong to? You, your wife or joint? If joint, half of it will be considered your wife's and does not count as part of your income. That part will be taxed at your wife's rate.

Alas...I think the devil is in his detail...his wife is DISABLED. My guess is (and it is just a guess, with no additional info to go on) that his wife currently enjoys certain benefits from the state that would be taken away from her if she earned any sizeable income from interest - thus it may not be an option for the OP to declare part of the interest as his wife's.

Regarding the fact that it may well simply be a gift from interest earned, this could make a whole heap of difference to the situation. If the money generating the interest is not actually in his name then this could indeed be an acceptable interpretation as far as the tax office is concerned. However, the benefactor would need to declare it as his income and be taxed on it.

If the benefactor sets up this arrangement purely for the purpose of being efficient wrt inheritance tax then that's all well and good. If the arrangement is to reduce his income tax burden then I'm afraid that he may well be mistaken (unless he actually transfers the 100K into the OPs name as well, and hence the tax liability on the interest earned).

As cheerful cat says, this sounds like it may be too complex a situation for any of us to do justice to on this forum. It's probably best to seek professional advice.

HtH
Reestit Mutton

bristol_pilot

It is a key issue whether the £100k has been passed to the OP or not.

The original posting says that they have received £100k to invest and have the income. However, I find it strange that if the OP has RECEIVED the £100k to invest that he says he has no say over how it can be invested.

What I suspect is happening is that the OP is to receive the income generated from the £100k as a "gift from income" Inheritance Tax avoidance scheme, with the donor retaining ownership of the capital (or perhaps this is kept within a trust). If this is the case, then there is no tax to be paid by the OP on the "income" as it is a gift (not the OP's 'income' in the taxable sense). (That is not what the OPs original post actually says, but perhaps it is what was meant?).

If the £100k has in fact been transferred to the OP as originally stated then the income from it is taxable and suggestions about paying more into a pension or putting money into tax-free savings are not irrelevant even if the OP cannot control where the £100k is invested because these suggestions relate to the OP's other sources of income e.g. from employment.

arkwright_2

Try the website http://stccalculator.inlandrevenue.gov.uk/UserDetails.aspx it provides a calculator to input your income and interest and work out the tax which is due.

Bumpy

Reestit_Mutton wrote: »

Alas...I think the devil is in his detail...his wife is DISABLED. My guess is (and it is just a guess, with no additional info to go on) that his wife currently enjoys certain benefits from the state that would be taken away from her if she earned any sizeable income from interest - thus it may not be an option for the OP to declare part of the interest as his wife's.

WRONG.

Disability benefit is not means tested. We could have a multi million pound income and still get what we get.

What an ill-informed presumption to make. :rolleyes:

debbie42

Bumpy wrote: »

What an ill-informed presumption to make. :rolleyes:

It wasn't a presumption, it was a guess, and was clearly identified as such.

It seems very unfair to criticise that post in this manner when it was trying to help by discussion, based on the distinct lack of original information being provided.