Tax on savings 2008/9

PenQuarr

Could anyone clarify the tax situation regarding savings income for 2008/9?
As a standard-rate tax payer, will I be taxed at 10% on the first £1500 (or so) of my savings interest? At the moment our savings are in my wife's name to take advantage of her personal allowance + lower rate tax allowance. As I will lose the 10% allowance on my income, would it pay me to transfer savings into my own name to take advantage of the lower rate?

Thanks in advance.

PenQuarr

kavomix

Well as of 6th april 2008 you will only receive the personal allowance then the 20% bracket starts. So if your wife currently doesnt use her personal allowance then it would still be wise to keep the savings in her name. Once the amount of saving goes over the personal allowance for the year (currently this yr its 5225) it will be taxed at 20%. So it doesn't matter whether the remainder is in your name or her name, either way its 20%. Only exception is if transferring savings back into your name pushes you into 40% bracket.

So to summarise. If your wife has spare personal allowance next yr, then its prob best to keep all savings still in her name.

PenQuarr

What confuses me is (as I understand it) that the 10% rate will be retained for savings income. This suggests that there will be a 10% tax band on savings income, above which tax will be extracted at 20% (as now). In other words, will I benefit from the 10% band along with other savers, regardless of other income?

Or am I being naiive?:o :question:

PenQuarr

jem16

As far as I'm aware the 10% band will remain for savings income alone.

However if you are already above this band for other income (i.e. this year it is £7455) then you will continue to pay 20% or 40% as normal.

PenQuarr

Thanks Jem16 - I suspected that was probably the case! If I get any info from other sources I will post it here.