Income tax on joint savings

jem16

jules9 wrote: »

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!

What Clapton meant was that if your earnings are already in the 40% rate you would be liable to pay 40% interest on all your (i.e. your half) interest. If your earnings were not completely into the 40% bracket, then you may not be paying 40% on all of your savings interest but some on basic rate and some on higher rate.

Have to agree with Clapton regarding Savings Account 3. I make 20% tax £311.20 Are you sure you have not transposed some figures?

CLAPTON

Let me say it again, the taxman bases his calculations on what you have told him. If you haven't given him any information for three years he is basing his estimate on the information at that time.
He doesn't get the information from your savings accounts.
So if you have joint accoun ts you need to tell him about your share (i.e half ).
If you write to him each year giving the correct figures then he will work out the correct tax.

whatatwit

Jules,
Sorry if this has already been covered, or you already have them, but do you and your wife have ISAs.
The interest is tax free and you can each invest up to £3000 per tax year.

Well worth doing IMO, especially if you fall in to 40% bracket.

longforgotten

Best ask, do you have any shares that you receive dividends on as you should be paying additional tax on those too I believe .......????

jules9

Thanks to all who have assisted me.

Monkfish_2

Say my mother is not a tax payer but I am and we open a joint account. What is stopping me putting 50K from another of my accounts into the joint account so I only pay half the tax?

Would this be seen as me giving my mother a gift of 25K which she would need to declare as income or capital gains?

I've never had a joint account with a partner where both holders are putting in varying amounts during the year, so I don't know how it works with regard to gifts and tax. It's all very confusing.

ceeforcat

1) You would pay the tax because you now only own half of the money.

2) There is no gift tax - your mother would pay nothing. CGT does not come into it. The 25K that you have 'given' to her would be taken into account in your estate should you die within seven years and it now also now increases the value of the estate of your mother.

Just_landed

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

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Could be because been adding money over the course of the year hense why the interest amount looks wrong.

p00hsticks

ceeforcat wrote: »

1) You would pay the tax because you now only own half of the money.

There is no gift tax - your mother would pay nothing.

However, the £25k would be regarded as you mother's when calculating any means tested benefits, so if she is in receipt of someting like Pension Credit it might not be a good move.

Also I'm not sure waht the procedure is for getting half the interest tax free on a joint account where only one person is liable for tax - it may be that the tax has to be deducted at source and you mother has to go throguh the rigmarole of claiming it back.

ceeforcat

1) Good point on the pension credit.

2) I believe that you can elect for half of the interest to be paid free of tax. Below is stolen from a major Building Society.

'If you have a joint account, where one account holder is a taxpayer and the other is not, we can arrange to pay your interest part net and part gross. Inland Revenue registration forms are available at any of our branches.'