Joint account taxes/interest

Outlaw91

Hello Money Saving Forums,

I have just set up a joint 123 bank account with my partner which we will use for paying bills etc at our new flat. One of the main reasons we chose the 123 was because of the opportunity to earn a nice bit of interest on the side.

But it cropped up in my head this morning that we are in different tax bands, I am basic and my partner is 40pc. I was wondering how this would affect the tax on interest paid by the account?

From a quick google it seems like the interest would be treated as 50/50 income but would be paid into our account at the 20% rate? This would mean my partner would have to complete a tax return in order to pay the rest.

Is this correct? I am not very clued up on the tax system but this seems a pretty painful way of doing this?

Any clarification or explanation would be appreciated.

Thanks!

grumbler

AFAIK it's always 20% by default (or 0% if R85 form is submitted).
You partner will have to pay the remaining 20% to HMRC - like for all his/her other accounts.

badger09

Outlaw91 wrote: »

Hello Money Saving Forums,

I have just set up a joint 123 bank account with my partner which we will use for paying bills etc at our new flat. One of the main reasons we chose the 123 was because of the opportunity to earn a nice bit of interest on the side.

But it cropped up in my head this morning that we are in different tax bands, I am basic and my partner is 40pc. I was wondering how this would affect the tax on interest paid by the account?

From a quick google it seems like the interest would be treated as 50/50 income but would be paid into our account at the 20% rate? This would mean my partner would have to complete a tax return in order to pay the rest.

Is this correct? I am not very clued up on the tax system but this seems a pretty painful way of doing this?

Any clarification or explanation would be appreciated.

Thanks!

Not necessarily.

If your partner already completes a SA tax return, he/she will just include 50% of the interest.

If he/she doesn't have to complete a return, a letter to his/her tax office after the end of each tax year is sufficient. HMRC will then adjust his/her code number to account for the additional 20% tax due on the interest.