Non Tax Payer and interest.

skylight

I am a non-tax payer now. And likely to be for some years! I would like my tiny weeny savings to be tax free, but I have a personal account with A&L and a joint savings with my tax-paying hubby with First Direct.

Do I have to declare the tax for (R85 is it???) for both account?

Would I/We be better off taking Hubby's name off the joint savings and having it just in mine?

We also have a joint account with YBS - a One Day account that is in "trust" for his eldest daughter. Now she is 16, that is no longer tax efficient, and they tell us that we cannot claim tax relief directly on this any more, even though she is a non-tax payer (unless the account is in her sole name and that is NOT going to happen - we would rather lose the tax/interest!). I understand that if the account was in my name only could I get the tax back on it as a non-tax payer?

I was self employed a few years ago and therefore I still get a tax return each year. So in addition to the questions above, am I better off filling in the tax forms at source, or waiting till my tax return at the end of the year.

Our accounts have less than £1 in each, but the YBS one has £20k in it.

InMyDreams

Yes, you'd be better off with all savings in your name (assuming you're planning on getting the balances a bit higher than £1!) We have all our savings in my name but are gradually balancing that out by using dh's ISA allowance.

Yes, you have to fill in an R85 forms for each account you have or tax will be deducted at source and you'll have to claim it back on your tax return. For joint accounts, half the interest will be tax free and the other half will be taxed according to your hubbie's tax band. I actually don't bother for current accounts though, as the tax paid on the interest always gets rounded up so you end up a few pence up anyway, so if we're talking just a few pounds it's really not worth the effort to do the R85 if you fill in a tax return anyway.

As for the £20k... start filling up your ISAs QUICK... If you get it done before next week, together you can put £6k into ISA's (£3k each) and then follow with another £6k on April 6th. Keep the rest in your name. (It's still worth using your ISA allowance too even though you are not a tax payer at the moment, so that when you do start to pay tax you don't have to start from scratch building the tax-free part of your savings up.)

skylight

Thanks! I meant under a £1k - not just a pound!!!

tiptoe_mouse

InMyDreams wrote: »

Yes, you have to fill in an R85 forms for each account you have or tax will be deducted at source and you'll have to claim it back on your tax return. For joint accounts, half the interest will be tax free and the other half will be taxed according to your hubbie's tax band.

This is certainly worth doing, although the bank or building society will tax your husband's interest at 20% regardless of whether he's a higher rate taxpayer. The rest would be collected via self-assessment if applicable.

Unfortunately not all banks and building societies will pay half the interest tax-free and the other half taxed. You'd have to check with the institution in question. If they won't then you don't have fill in a full tax return to get the interest refunded. You can simply fill in form R40 (http://www.hmrc.gov.uk/forms/r40.pdf). Notes for completing it are here: http://www.hmrc.gov.uk/forms/r40notes.pdf

My partner was self-employed and kept getting tax returns after he ceased to be, but last year he got a letter saying "We've decided you don't need to fill in a self-assessment tax return any more". So there is hope of an end to that chore.

tiptoe

Jake'sGran

Hi Charlotte, I always complete an R85 when I open an account (and I always seem to be opening them:o ) It is much easier to do it that way. Also, I have always kept my accounts separate to my husband's. He has no interest in money so I have to organise his tax affairs too. Cahoot deducted tax by mistake from my account last year and I had to write to the IR to get it repaid - well I completed a tax return actually. I put money away every year for my two grandchildren and complete R85s for them too but one is just 16 but will remain a non taxpayer for some time. As I understand it their parents become liable for tax on the interest on their accounts if it is over a certain amount. I have always found the IR very helpful and they have agreed to allow me to continue as a non-taxpayer after I answered all their queries.

agal

Jake'sGran wrote: »

I put money away every year for my two grandchildren and complete R85s for them too but one is just 16 but will remain a non taxpayer for some time. As I understand it their parents become liable for tax on the interest on their accounts if it is over a certain amount.

I don't think that's right. The parental tax liability if the interest is over £100 only applies if the money comes from the parents. In this case it is coming from the grand-parent (you) so the children are allowed to receive their full tax-free personal allowance (about £5000) before being liable to pay tax.

Jake'sGran

Hi Agal, I believe you are right. Sorry for the lateness of this response but I have found that once I start reading messages on MSE I never seem to look at other things that interest me before my computer time runs out i.e. meal time etc. I think Charlotte, the lady who wanted to know, may have found the answer anyway if she had a read on the Inland Revenue website.