Income tax on joint savings

jules9

I have a couple of joint savings accounts, eg wife and I both named as account holders.
How does this work in terms of tax payment? I have just had my income tax PAYE coding notice which gives a figure for my taxable income at 40%.
If say we have earnt £900 interest, is it just me that pays the tax at this rate on the amount or do I halve the total as it is joint interest in both our names?. My wife does not fall in the 40% tax band.
Any help appreciated.

longforgotten

Tax at 20% will be deducted by the bank from the gross interest on the joint account if you are both tax payers.

You need to let the tax man know that you need to pay the additional 20% tax on your share of the interest. If you already complete a tax return it will be sorted then, otherwise I suggest you give them a ring, after the end of the tax year, for advice.

CLAPTON

the tax man will assume that the interest in split 50-50 so you need to declare half the interest on your tax form.

jules9

Many thanks for that reply, it may help if I give some figures then hopefully I can get my head around this.
I have a PAYE coding notice for 2007-2008
which states: savings income taxable at 40% : -£739 then -£911

On checking my certificates of tax deduction for 2006-2007 which I guess the above is based on:

Savings account 1. Joint Gross interest £2165 tax deducted £433

Savings account 2. Joint Gross interest £1240.76 tax deducted £248

Savings account 3. My name only interest £1556 tax deducted £231

Savings account 4. My name only interest £710 tax deducted £142

Savings account 5. My name only interest £416 tax deducted £83

So based on this can anyone assist me in how much extra I owe and if so do I just ring them to pay it or is it more complicated than that.
Thanks in advance.

CLAPTON

a. can you check the figure for saving a/c 3 ...doesn't seem correct.

b. did you fill in a tax form for 06-07 or write to them giving any information about interest? if so what info did you give them?

jules9

Hi,
Yes I have checked account three and its an Ing account and that is theamount shown.
I have my PAYE sheet for 2006-2007 which shows
savings income taxable at 40% -£895 and -£1223

Does this help?

CLAPTON

I'm not sure I really understand whats happening here but:

firstly .. i still dont understand the figures from your account 3 although its maybe not central to you query.... but the tax deduced on savings accounts ought to be 20% unless they are ISAs.

so your first a/c shows 2165 gross and 20% of this is 433 which is exactly what you show
similarly your fifith a/c shows 416 gross and 20% of this is 83.2 which is about right
but your third a/c shows 1556 gross and 20% of this is 301.2 but you only show 231....

secondly the tax code:
the tax man takes the figures that you give him when you fill out your tax form ... he doesn't usually use figures directly from the savings accounts.
So my question is what did you put on your tax return about your saving?
Also does your salary take you into 40% tax? i.e. so all your interest should be taxed at 40%
Is there any figure for an underpayment from the previous year?

margaretclare

jules9 wrote: »

I have a couple of joint savings accounts, eg wife and I both named as account holders.
How does this work in terms of tax payment? I have just had my income tax PAYE coding notice which gives a figure for my taxable income at 40%.
If say we have earnt £900 interest, is it just me that pays the tax at this rate on the amount or do I halve the total as it is joint interest in both our names?. My wife does not fall in the 40% tax band.
Any help appreciated.

I seem to have heard it from somewhere, that it's not tax-efficient to have money in joint accounts at all. Since everyone has an individual tax allowance, I've always understood that both partners in a marriage should use their own tax allowances to the full, by having savings accounts in their individual names and that this is particularly advantageous to higher earners i.e. people who pay tax at 40%.

Or have I misunderstood completely?

Margaret

jem16

margaretclare wrote: »

I seem to have heard it from somewhere, that it's not tax-efficient to have money in joint accounts at all. Since everyone has an individual tax allowance, I've always understood that both partners in a marriage should use their own tax allowances to the full, by having savings accounts in their individual names and that this is particularly advantageous to higher earners i.e. people who pay tax at 40%.

Or have I misunderstood completely?

Margaret

Having your money in joint accounts makes no difference tax-wise to the interest paid. For joint accounts you would declare half the interest each.

Where it might be advantageous is for all the savings to be in the sole name of the lower taxpayer. Perhaps this is what you read about?

margaretclare

jem16 wrote: »

Having your money in joint accounts makes no difference tax-wise to the interest paid. For joint accounts you would declare half the interest each.

Where it might be advantageous is for all the savings to be in the sole name of the lower taxpayer. Perhaps this is what you read about?

Maybe it was. Thanks for clarifying.

Margaret

jules9

Hi Clapton,
To answer your queries,
so your first a/c shows 2165 gross and 20% of this is 433 which is exactly what you show
similarly your fifith a/c shows 416 gross and 20% of this is 83.2 which is aboso your first a/c shows 2165 gross and 20% of this is 433 which is exactly what you show
similarly your fifith a/c shows 416 gross and 20% of this is 83.2 which is about right
but your third a/c shows 1556 gross and 20% of this is 301.2 but you only show 231....
ut right
but your third a/c shows 1556 gross and 20% of this is 301.2 but you only show 231....
Yes, this is what my savings account form shows.
secondly the tax code:
the tax man takes the figures that you give him when you fill out your tax form ... he doesn't usually use figures directly from the savings accounts.
So my question is what did you put on your tax return about your saving?
I havent filled out a tax form for about 3 years, I have just had a form from the taxman giving estimated figures which have always looked about right.

Also does your salary take you into 40% tax? i.e. so all your interest should be taxed at 40%
Is there any figure for an underpayment from the previous year?
Yes im on 40% tax rate. However I thought that as we have joint savings I would only pay tax on half the interest.
Sorry to seem so naive but I really dont understand tax at all. Thats probably obvious now. I appreciate all the help!