Tax on Joint Account

argomatt

Hi,
This is probably a stupid question but I can't find the answer.

I am about to move into a new house together with my girlfriend. We have opened a joint account to pay the household bills from.
We have chosen a Flexdirect account from the Nationwide, paying 5% interest.

I am a higher rate taxpayer and she pays basic rate tax.

I think the interest is paid net of basic rate tax.

Will this be okay or will I be liable for extra tax on my half of the interest?

nomunnofun

You will be required to pay an additional 20% tax on your half of the gross interest.

If the net interest is £80, the gross will be £100. You will owe the tax man £20.

I presume that you earn more than £41455 per annum?

The interest on this account is 5% for one year only and on balances up to £2500. If you feel aggrieved by the £20, can you not open one in your girlfriend's name only - and keep the balance at £2500?

argomatt

I had suspected it would work like that, but thank you for confirming it for me.

I don't mind paying the tax which I am liable for, I just wanted to check how much it was likely to be.

I don't expect we will keep a large balance in it, and the main advantage of the account is the 12 months free arranged overdraft, which will be a great help initially after moving in.

It's possible that switching to a 123 account with Santander might be beneficial but until I know how much the bills will be I can't be certain the cashback will outweigh the monthly fee.

CLAPTON

presumably you already declare the interest on your (non ISA) savings a/cs

argomatt

presumably you already declare the interest on your (non ISA) savings a/cs

I don't have any savings accounts other than my ISA.
I will tell them about this interest when I do the self assessment for this year.

Savvy_Sue

argomatt wrote: »

It's possible that switching to a 123 account with Santander might be beneficial but until I know how much the bills will be I can't be certain the cashback will outweigh the monthly fee.

I'd be astonished if it didn't, and they do have a calculator on their site so you could see how small your bills would have to be NOT to make money.

Just as an example, I'm getting nearly £2 back for two not very expensive contract mobile DDs; your council tax should be easy enough to work out at 1%, my water cashback's over £1, and my gas / electric is over £3. I accept I probably have larger bills than many, but I'd be getting something back if I only did mobiles and water.

You also get a four month free overdraft, which would hopefully be enough to start you off in your new home.

:rotfl: Never thought I'd be recommending Santander, but dealing with them online is OK, so far!