Tax on savings accounts?

JackRS

This is a very basic question and I think I know the answer but…..

If my wife has a savings account but is not employed, not earning and therefore not reached the tax allowance, should she still have to pay tax on interest?

Jonbvn

Quick answer is no.

Your wife can earn up to GBP5225 per annum before paying tax. This includes any interest on savings. Just complete form R85 and send it to the bank/BS.

JackRS

Well that's good news! I don't need to set up cash ISA's etc, she can have it all in a good savings account. We're considering Sainsbury's on line at 6.25%, can they handle the R85 form online?

Jonbvn

JackRS wrote: »

We're considering Sainsbury's on line at 6.25%, can they handle the R85 form online?

I don't think you can do it online. You have to download the form, fill it in by hand and sign, then post it off to your bank/BS.

debbie42

It's still worth considering ISAs, even if you aren't a tax payer. You never know when things may change, and the ISAs are a tax shelter, whereas any ordinary savings would be subject to tax if income changed.

JackRS

debbie42 wrote: »

It's still worth considering ISAs, even if you aren't a tax payer. You never know when things may change, and the ISAs are a tax shelter, whereas any ordinary savings would be subject to tax if income changed.

Yeah you are right, but this is a short term saving plan where the money has to pay for something after 12 months and I need a bit of flexibility in terms of adding and taking away. However if employment situation does change we could then start up the cash ISA?

debbie42

JackRS wrote: »

Yeah you are right, but this is a short term saving plan where the money has to pay for something after 12 months and I need a bit of flexibility in terms of adding and taking away. However if employment situation does change we could then start up the cash ISA?

You have £3000 (currently) cash ISA allowance for each financial year. If you don't use it this year then it's gone: it doesn't carry forward. You'll get some for each year (unless the tax rules change, of course!).

In your wife's situation, there isn't too much point in taking out an ISA if the money isn't able to be left there long term. You're better just going for the savings account that suits you best in terms of rate and flexibility etc.

edited to say: Don't know if you're aware, or if it applies to your wife, but you can claim tax back for previous years if you overpaid it on savings accounts.

*!*HIBS*!*

debbie42 wrote: »

...you can claim tax back for previous years if you overpaid it on savings accounts.

Up to 6 years only

JackRS

Wheny ou register for the Sainsbury's online savings it gives you a link for the R85 form and tells you what to do.

Not sure how to claim back the tax on existing accounts as they are joint and i guess it would be half the interest and tax?

gt94sss2

JackRS wrote: »

Not sure how to claim back the tax on existing accounts as they are joint and i guess it would be half the interest and tax?

Yes, by default it would be half the tax paid in a joint account.

To reclaim this amount, your wife will need to send in an R40 tax return for each tax year she wants to reclaim the tax.

You have five years from 31 January after the end of the tax year for which you are claiming back tax to make your claim. For example, if you paid more tax than you needed to for the tax year 2002-2003, you have until 31 January 2009 to claim tax back.

There is also some useful information from the HMRC here

Regards
Sunil