Joint or Single ISA

Jaguar_Skills

By way of a background, I am a HRT payer, my OH doesn't work so the majority of my money gets saved into my pension. 
We have realised that by overpaying our mortgage by around £700 pcm probably isn't the best idea as our interest rate is 2.94% and likely to go lower when we remortage soon.   Therefore we wanted to open an ISA/s.   We have decided on Vanguard given the low cost, and it is where both our pensions are invested predominantly. 
My question relates to whether we should do this as a joint app or open two?  I doubt we will put £20,000 in a year although we may do because of the tax relief I currently get on the pension.  We also aren't married, although are going to do a quick registry office thing after this Covid situation dies down as I am still paying quite a lot of tax on our 2nd flat when I could just transfer it to her if we were married. 

Thoughts on the ISA/s would be great - thanks. 

bowlhead99

Jaguar_Skills said:

My question relates to whether we should do this as a joint app or open two?  I doubt we will put £20,000 in a year although we may do because of the tax relief I currently get on the pension.  

As implied by the name, Individual Savings Accounts can't be held jointly, so that clears up your dilemma.

As the only one in danger of paying high rate tax it would make sense that you do it in your name rather than hers. If you marry, and then later you kick the bucket, she would inherit an ISA allowance equivalent to the balance of your account when you passed on - so not really necessary to use her own allowance now, even if she ultimately plans to live off your assets rather than employment in the event of your demise. 

We have realised that by overpaying our mortgage by around £700 pcm probably isn't the best idea as our interest rate is 2.94% and likely to go lower when we remortage soon.   . 

Almost 3% over the short term isn't a bad tax-free guaranteed return given the uncertain economic times we're in. Still, if you are going to move to a better rate and won't need the mortgage overpayment to let you access an even better one through improved LTV when you remortgage this time or next, you'll probably get better long term returns through investment funds.

Jaguar_Skills

Thanks Bowlhead, such a naive question given that I did not know it stood for individual!
Given we always like to consider all permutations, do you know what happens if, rather than I die, we were to split? Both before and after marriage?
I should add, she may go back to work and would look to do 2/3 days, but that will still put her in the higher rate category possibly.   Also by that time, I think I will end up in the additional rate category - not sure if any of this makes any difference. 

bowlhead99

If you spilt and are not married, you will keep your respective assets. If you split and are married it may depend on how long you were married and how much you each had pre-marriage and the nature of your relationship and financial circumstances. If the reason she's not working and considering going back part-time is that you've made babies together, this changes the dynamic somewhat.

Your moving to additional rate tax would increase the amount you would pay on dividends or interest outside a tax wrapper, would not change the tax payable on capital gains outside a tax wrapper, and would be irrelevant to how much UK tax you pay inside an ISA (i.e. still nil). It would make pensions relatively more attractive than ISAs (greater tax relief than when on a 40% marginal rate) but perhaps less available to you (annual pension contribution allowance tapers down if you earn too much).

Jaguar_Skills

Thanks again. You are a star.   Yes we have a son together, with another potentially on the way. 
The reason she is not working is a mix of him and not needing to.   She was working 2 days a week as a freelance QS up until the start of Covid when the sites were shut.  She will definitely have the summer off then potentially go back (if the situation relaxes) in September when he gets 15 hours free childcare. 
I am right on the threshold atm, £150k but go over this slightly because of the profit on the flat. 

Thanks again for your help, really do appreciate it. 

eskbanker

Jaguar_Skills said:

We also aren't married, although are going to do a quick registry office thing after this Covid situation dies down as I am still paying quite a lot of tax on our 2nd flat when I could just transfer it to her if we were married.

Who said that romance was dead, eh?

Jaguar_Skills

eskbanker said:

Jaguar_Skills said:

We also aren't married, although are going to do a quick registry office thing after this Covid situation dies down as I am still paying quite a lot of tax on our 2nd flat when I could just transfer it to her if we were married.

Who said that romance was dead, eh?

Its a fair point.  We have always planned to marry but the 2nd child is taking a lot longer than No.1.   She didnt want to be pregnant at her wedding hence it keeps getting put off but the tax issues is becoming a factor. 

eskbanker

"....for richer for poorer (subject to allocation of all available reliefs and allowances), in sickness and in health, until disadvantageous taxation regulations shall us part...."

badger09

Jaguar_Skills said:

eskbanker said:

Jaguar_Skills said:

We also aren't married, although are going to do a quick registry office thing after this Covid situation dies down as I am still paying quite a lot of tax on our 2nd flat when I could just transfer it to her if we were married.

Who said that romance was dead, eh?

Its a fair point.  We have always planned to marry but the 2nd child is taking a lot longer than No.1.   She didnt want to be pregnant at her wedding hence it keeps getting put off but the tax issues is becoming a factor. 

What is she having this time? Elephant? Rhino? 

Sorry. Wish you well, whatever you decide. 

Jaguar_Skills

badger09 said:

Jaguar_Skills said:

eskbanker said:

Jaguar_Skills said:

We also aren't married, although are going to do a quick registry office thing after this Covid situation dies down as I am still paying quite a lot of tax on our 2nd flat when I could just transfer it to her if we were married.

Who said that romance was dead, eh?

Its a fair point.  We have always planned to marry but the 2nd child is taking a lot longer than No.1.   She didnt want to be pregnant at her wedding hence it keeps getting put off but the tax issues is becoming a factor. 

What is she having this time? Elephant? Rhino? 

Sorry. Wish you well, whatever you decide. 

Nothing at the moment - a rhino would do...