Savings account tax free question.

eric4395

My wife was made redundant a few months ago, she has paid her national insurance contribution for years and is currently claiming job seekers allowance for up to 6 months. We have currently come into a sum off money which we are going to put into a fixed savings account for 2 years. As my wife is not working and not paying tax how much is she allowed to put into this account in her name before she is required to pay basic tax rate on these savings.Thanks for any help on this query.

masonic

It will depend how much taxable income she has earned so far this year, the rate on the savings account, and how regularly interest is paid on the account.

Since she is currently claiming job seekers allowance, you should also consider whether she will continue to qualify with the new savings (presumably you expect her to be out of work for the rest of this tax year at least, as if she finds work within the 6 months of contribution based JSA she will likely not qualify for tax free interest?).

ceredigion

Filling in the guidance notes the are in with the R85 form will give the answer

eric4395

masonic wrote: »

It will depend how much taxable income she has earned so far this year, the rate on the savings account, and how regularly interest is paid on the account.

Since she is currently claiming job seekers allowance, you should also consider whether she will continue to qualify with the new savings (presumably you expect her to be out of work for the rest of this tax year at least, as if she finds work she will likely not qualify for tax free interest?).

She was made redundant in April her job seekers allowance will be finishing in Nov so she has been getting £ 73 a week since then. The savings rate is 2.4% for 2 years interest paid yearly. If she has not found work by Nov say, is there an actual sum she can save without paying tax on it.

masonic

eric4395 wrote: »

She was made redundant in April her job seekers allowance will be finishing in Nov so she has been getting £ 73 a week since then. The savings rate is 2.4% for 2 years interest paid yearly. If she has not found work by Nov say, is there an actual sum she can save without paying tax on it.

In that case, no interest is payable in this tax year. No tax will be deducted automatically from interest in the next tax year for anyone (and the tax free savings allowance will apply), so there is nothing for her to do in order to receive gross interest. Assuming she is normally a basic rate taxpayer, even if she finds work by the next tax year, she can save up to £41.6k at that rate before she will have to pay any tax on the interest