Joint Accounts - Who determines Tax Split

fizzypop

Normally I believe tax is split 50:50 on joint account interest (husband & wife) when reporting to HMRC.

Can this equal split be changed to maximise use of tax free allowances and does this have to be reported to HMRC when completing self-assessment.

Our wills leave everything to the surviving spouse so this is part of IHT planning by making access easy for the survivor.

bowlhead99

HMRC assume that everything in the joint account is jointly owned in equal shares because you are husband and wife and so the income made on the capital likewise belongs equally to both parties.

If the cash in the account does not belong equally to the husband and wife you can rebut that presumption by making a declaration to HMRC that the money does not belong equally to the two of you, and that the income should be considered to accrue proportionately to the amounts of cash owned by the two parties, which might conceivably be 99:1 or some other ratio.

The declaration would endure until there is a change of circumstances, such as someone taking money out and changing the proportion of what is left, or a new contribution being put into the account in something other than a 99:1 proportion and changing the mix.

As an aside, if the wills are 100% in favour of the spouse (ie the entire estate is covered by spouse exemption) it doesn't seem like there is much IHT planning going on, nor would it be particularly difficult for the surviving spouse to get their hands on the current account cash (assuming there isn't a big IHT bill to pay because of previous gifts etc being included in the estate and needing the tax bill to be paid ahead of distributing the residue...)