Advice re. inheritance please

Bogof_Babe

My late father's estate is now nearing completion, and it looks as if I will be receiving around £60K. As I am a non-taxpayer and want to remain so, I was planning to transfer about £50K to my husband who is a taxpayer, and also transfer some of the direct debits like C/Tax from my bank account over to his, which he can then cover with the interest on the £50K. As I will no longer have the DDs coming out of my account, this will free up an equivalent amount (of interest) to ease the situation re. groceries and day-to-day expenses that I pay for.

There is a slight complication, in that we (my sister & I) have informally agreed not to touch the capital from dad's estate in case mum needs it at a later stage. She is currently in a residential home but if it became necessary for her to transfer to a Nursing home, obviously the costs would increase. She is quite happy for us to spend the interest, and as she requested a Deed of Variation to include us now, rather than when she herself passes on, we have no wish to use any of the capital at this stage.

What I need to do is transfer £50K of my own current savings to my husband, and then pay in the inherited money to my account, to make it up to what it was before. Both transactions will be via my current account and the transfer will initially be into husband's current account. My main concern is whether all this movement of quite substantial sums might be mistaken for money laundering, and trigger tax returns, which I really do not want the bother of dealing with every year. I know it sounds stupid, but my dad had a real phobia of doing his tax return and I seem to have inherited it!

Also, can anyone recommend the best place for husband to put this extra money? He needs it to be 100% secure, and to pay out a monthly income. Preferably a simple to operate online account. We have both used our ISA allowance for the year.

(We will arrange our respective Wills to ensure that "mum's" money returns to her ownership, should I meet with an untimely fate.)

noh

I don't see any advantage in transferring it to your husbands account. No tax will be saved in fact it may even mean a larger tax liability due to your 10% tax band not being used.
Transferring a large sum won't in itself trigger the issuing of any tax returns, it may cause money laundering questions to be asked by the receiving bank but that shouldn't be a problem as its a legitimate transfer.

Nigel

debbie42

I'm a non-tax payer, and most of our savings are in my name for the tax advantages, so, like the previous poster, I can't understand the benefits of moving the cash to your tax-paying partners name?

If you were near your income threshold, there are savings accounts that do have tax benefits you could consider, such as ISAs and NS&I savings schemes.

zag2me

like others say, i see no advantage in transfering your money into your husbands name. You are a non tax payer already, why would inheriting money change that?

Bogof_Babe

Well (thanks both, btw), I have thought all around this situation and it does seem there is no escape from the dreaded self assessment tax return .

The inheritance, added to my current funds, would push my annual interest above my personal tax-free allowance, so unless I stick it in Premium Bonds or transfer it elsewhere, I would become a taxpayer.

I picked up some forms from the local tax office last year, to attempt to reclaim tax owed to OH as he finished work half way through a tax year, and quite frankly they might as well have been in a foreign language. This reinforces my fear of becoming liable for completing anything tax related myself. Our financial affairs are actually pretty straightforward, but the one-size-fits-all self assessment form is beyond a joke. I think I am reasonably intelligent, but the very prospect of completing one makes me panic.

OH is a taxpayer as he has savings generating interest above his personal allowance, in case anyone spots the possible discrepancy in my posts. He has 20% deducted at source from his interest payments, whereas I do not. So on this basis neither of us have to bother with fiddly annual returns, even if it does cost us a few quid.

RayWolfe

Wow!
It really must be nerve wracking if you are prepared to volunteer to pay tax rather than fill in a very simple form. Get someone to do it for you and pay them some of the tax you will save.
Please!

Bogof_Babe

Do we have a deal, RayWolfe?

cheerfulcat

Bogof_Babe, I don't really think that you have a problem - if your only income is from bank/building society interest, all you need to do is inform the banks/building societies involved that you are no longer eligible for gross interest payments and they will take off the tax due. You shouldn't need to fill in a tax return...have a look here. But IANAE so probably best to check with your local tax office.

Bogof_Babe

But if I change my interest to tax-paid at source, then I will have to fill out a form to reclaim my personal allowance's worth, won't I? Otherwise I will lose out on any tax free income.

I don't suppose it is possible to hold various savings accounts and pay tax on some of them but not on the others?

I'm going to have to bite the bullet and tackle these flipping forms, aren't I?

Edit: Oh I like this bit from your link... have annual income from savings or investments of £10,000 or more (before tax).

That puts a different complexion on things altogether! I'm surprised though - it makes a mockery of the so-called figure of £5250 (I think) before tax liability kicks in.

noh

You won't have to fill in a self assesment form.
You will need to fill in a R40 to reclaim tax on savings its fairly straightforward.
http://www.hmrc.gov.uk/forms/r40.pdf
If you transfer the money to your husband you will as couple be paying £220 more tax per year than you need to due to you not using your 10% band.

Nigel

missile

You can top up your existing savings account(s) so that your income is just below your personal allowance threshold. You and husband both use your ISA allowances (2X£7K) and save with NS&I Index-linked Savings Certificates (2X£15). These are tax free, and do not need to be declared. Put any "extra" into a seperate savings account where you do not fill in an R85 and thus tax will be deducted at source.

Thus there will be no need to fill in any forms or make any declarations to the IR.