Savings in my name only as hubby is higher rate tax payer?

pinkteapot

We're in the process of selling our house, and will be renting for a year or so before buying again. As a result, we'll have our house equity in savings accounts for a while (split between banks - I know about the FSCS protection limits).

Hubby is a higher rate (40%) taxpayer and I'm standard rate (20%). Are we allowed to put all the money into savings account in my name only, and therefore pay 20% tax on the whole amount of interest, instead of 20% on half and 40% on half?

Or is HMRC wise to this trick and would we be breaking a rule/law?

We know that I get a £1k per year tax-free savings interest allowance and hubby £500, so we'd put an amount in his name to earn around £500/year interest to make sure we use those.

Also aware that the non-tax issue with putting all/most of it in my name is hubby having to trust me.

We've never paid tax on savings interest before as we've spent ten years over-paying our mortgage and only keeping a small amount in savings, so trying to work out the best way to do things.

xylophone

Are we allowed to put all the money into savings account in my name only,

Yes. You and your husband own your home. You are entitled to half the proceeds each.

Your husband gives you his half.

You deposit the money in your accounts.

As you say, this money then becomes legally and beneficially yours, so if you choose to withdraw the lot and run off to live in Monte Carlo.......:)

Is the money under £1mn?

You could hold the lot safely in an account with NS&I if so.

https://www.nsandi.com/income-bonds

pinkteapot

xylophone wrote: »

Is the money under £1mn?

Sadly, yes.

Thanks! I'll look at NS&I.

kidmugsy

A year is a reasonable time to hold £50k each in Premium Bonds. The interest (i.e. winning small prizes) will work out at around 1.25% p.a. tax-free, plus you get a tiny chance of a bigger prize.

Note that the prizes don't use up any of your savings allowances.

It's best to buy PBs late in a month e.g. if you did it late this month your bonds would be in the December draw. You'd probably aim to cash them in early in some later month.

pinkteapot

We were already pondering Premium Bonds, given the rubbish interest rates at the moment. We can't lock the money away for a year as we could potentially buy a house quicker, so we're stuck with (relatively) instant access accounts and the best rates are around 1.4%.

polymaff

pinkteapot wrote: »

We were already pondering Premium Bonds, given the rubbish interest rates at the moment. We can't lock the money away for a year as we could potentially buy a house quicker, so we're stuck with (relatively) instant access accounts and the best rates are around 1.4%.

Given their tax-free status, the Premium Bonds should return about 1.57% relative to what you, singular, could achieve in a taxable savings product.

And it could be you that scoops a big'un !

C_Mababejive

I think largely, the HMRC are too stupid to track the minutiae of PAYE small fish financial activity. What they try and do is stampede you into prostrating yourself and fessing up to everything on pain of death.

jimmo

pinkteapot wrote: »

We were already pondering Premium Bonds, given the rubbish interest rates at the moment. We can't lock the money away for a year as we could potentially buy a house quicker, so we're stuck with (relatively) instant access accounts and the best rates are around 1.4%.

As a higher rate taxpayer your husband is eligible for the Personal Savings Allowance of £500 per tax year.
https://www.gov.uk/apply-tax-free-interest-on-savings

At 1.4% it would be worth putting say £35k in his name to utilise that.
Actually with instant access savings accounts you could be a bit cleverer than that. Interest is chargeable to tax when it is credited so you could put more than £35k in his name and then close (or renew) the account in March or when you calculate he will have £500 interest if sooner.
Similarly you, as a basic rate taxpayer will have a Personal Savings Allowance of £1000 so it is probably worthwhile closing or renewing your accounts in March.

Dazed_and_confused

If hubby is a higher rate payer who is also liable to pay the High Income Child Benefit Charge then he will also need to consider the additional HICBC he might have to pay by having £500 of interest.

There is no actual savings "allowance", it is just a 0% tax rate and as such the interest is still taxable income and would potentially add a further 5% to the HICBC

Similarly if he is in the £100-£123k income bracket with £500 interest it will further reduce his Personal Allowance.