tax liability for housewife for my savings

imtiazghani00

My wife is a housewife and has no income. I was planning to open a Santander 123 current account in her name alone. We already have a joint account in the same with an amount of £20000. I understand the tax liability is split evenly (50%) between the 2 of us (so £10000 for each of us).

Now, I wish to transfer another £20000 into her account. My wife has no job and hence does not pay income tax.

The Santander 123 account will give her 3% interest for this amount.

What will be her tax liability for this amount? My income has already been taxed at source. Is there a problem is I transfer this to her account of which she is the sole account holder? Will she have to start paying tax for the amount or its interest?

Your help is very much appreciated. We are saving for a deposit on a house in maybe 6 months.

bigadaj

There will be no tax to pay as this will be well within her personal allowance. An r85 form needs to be completed to stop deductions, if not then tax will be taken but you can claim it back.

You're no doubt aware that this is technically a current account and so needs money to be paid in and direct debits set up to allow interest to be credited.

jem16

imtiazghani00 wrote: »

What will be her tax liability for this amount?

If she has no other income, then none as she is a non taxpayer.

My income has already been taxed at source. Is there a problem is I transfer this to her account of which she is the sole account holder?

No problem at all and many married couples will do exactly that. Remember though that technically the money will become solely hers and no longer yours.

Will she have to start paying tax for the amount or its interest?

Tax is always based on the interest earned, not the capital. As a non taxpayer she should register to have her interest paid gross by completing an R85 form. Contact Santander and get this organised for both the joint account and the sole account.

Archi_Bald

jem16 wrote: »

Contact Santander and get this organised for both the joint account and the sole account.

or just do it in your Santander online banking
My Details & Settings -Change personal details - Change tax status
(not sure this also works for joint accounts)

Vortigern

Archi_Bald wrote: »

or just do it in your Santander online banking
My Details & Settings -Change personal details - Change tax status
(not sure this also works for joint accounts)

Correction: get your wife to do it in her online banking. She can do it for each account.

From personal experience I can confirm it works for joint accounts, but it must be done on the non-taxpayers ID.

imtiazghani00

Thank you very much to everyone.

You guys have been extremely helpful and all my doubts cleared very quickly!

Unfortunately we have been paying tax (deducted by the bank) on the interest accrued in our joint account ever since we opened the account many moths ago. I guess I'll have to start the process to claim it back. I'll also change her status in the account settings on her account. I do understand the implications of transferring the money to her account solely and into a new current account.

Thank you again.

Jonbvn

imtiazghani00 wrote: »

Thank you very much to everyone.

You guys have been extremely helpful and all my doubts cleared very quickly!

Unfortunately we have been paying tax (deducted by the bank) on the interest accrued in our joint account ever since we opened the account many moths ago. I guess I'll have to start the process to claim it back. I'll also change her status in the account settings on her account. I do understand the implications of transferring the money to her account solely and into a new current account.

Thank you again.

We have been doing the same for many years.

My wife is now quite a wealthy woman, whereas I am a pauper;)

Our accountant told us that this rather angered a tax inspector who was checking our returns. Seems all good to me.:p

molerat

If she registers for tax free status now any tax paid this FY on her half will be refunded into the account.

Newly_retired

Do encourage/ allow your wife to access her account online herself, and the joint one too.
I am always sad when I speak to a widow who hasn't a clue about the household finances because her husband has always seen to all that.