Query on joint savings account

ringo747

Hi, I've recently set up a joint savings account on the santander 123 and will use this to make the most of the 3% savings associated with it.

My query is around paying tax on the interest. How does this work in practice for a joint account? I'm in the higher tax bracket and my partner is a standard rate taxpayer. I believe having the account in two names is better for tax reasons but not sure how/why.

Is there any forms that need to be completed to ensure tax on this type of account is paid correctly?

Thanks

F1F93

In my experience, interest is split in half and you'll be taxed on your half.
I'm a non-taxpayer and when i filled in the form (R85?) we were still taxed, just half the amount was taken.

I could be completely wrong though!

badger09

ringo747 wrote: »

Hi, I've recently set up a joint savings account on the santander 123 and will use this to make the most of the 3% savings associated with it.

My query is around paying tax on the interest. How does this work in practice for a joint account? I'm in the higher tax bracket and my partner is a standard rate taxpayer. I believe having the account in two names is better for tax reasons but not sure how/why.

Is there any forms that need to be completed to ensure tax on this type of account is paid correctly?

Thanks

The Santander 123 account is a current (not savings) account but the principle still applies. Interest will be taxed at 20% before it is credited to the account. You need to declare your half share to your tax office, either on a self assessment return if you complete one - or in a letter if you don't need to complete one for any other reason. Your tax office will then adjust your code number to collect the additional tax due through your salary.

ringo747

Thanks, my plan (sensible?) would be to let money build up in the account and then whack it into an ISA before the cut off date.

Does every penny of interest automatically get taxed at 40% for me being higher tax payer or is it tiered?

CLAPTON

ringo747 wrote: »

Thanks, my plan (sensible?) would be to let money build up in the account and then whack it into an ISA before the cut off date.

Does every penny of interest automatically get taxed at 40% for me being higher tax payer or is it tiered?

your share of the interest will be taxed at your top rate (just like if you had a salary increase) so all your interest will be taxed at 40%
however this isn't automatic as you need to tell HMRC about the saving interest after year end