Taxed on my savings

deaneo4

Can anyone help me, I have just learned that I have been taxed £400 on the Building Society saving I made last year. I was obviously oblivious to the fact that being a higher rate tax payer I was only allowed £500 per year, tax free & not the £1500.(we never normally save !)   The money was not mine it was my wife's and she does not work, therefore I'm sure, as she is paying zero tax on no earnings she would be allowed to earn all of this money tax free ? We only invested it under my both names to secure the £85k FSA safeguard. Is there anyway I can prove to HMRC that the funds were innocently invested based on the above and provide evidence that this is actually my wife's money and not mine ?   

Ed-1

deaneo4 said:

Can anyone help me, I have just learned that I have been taxed £400 on the Building Society saving I made last year. I was obviously oblivious to the fact that being a higher rate tax payer I was only allowed £500 per year, tax free & not the £1500.(we never normally save !)   The money was not mine it was my wife's and she does not work, therefore I'm sure, as she is paying zero tax on no earnings she would be allowed to earn all of this money tax free ? We only invested it under my both names to secure the £85k FSA safeguard. Is there anyway I can prove to HMRC that the funds were innocently invested based on the above and provide evidence that this is actually my wife's money and not mine ?   

If you saved it in a joint account then legally half of it is yours and the other half hers and you are taxed accordingly.

Dazed_and_C0nfused

deaneo4 said:

Can anyone help me, I have just learned that I have been taxed £400 on the Building Society saving I made last year. I was obviously oblivious to the fact that being a higher rate tax payer I was only allowed £500 per year, tax free & not the £1500.(we never normally save !)   The money was not mine it was my wife's and she does not work, therefore I'm sure, as she is paying zero tax on no earnings she would be allowed to earn all of this money tax free ? We only invested it under my both names to secure the £85k FSA safeguard. Is there anyway I can prove to HMRC that the funds were innocently invested based on the above and provide evidence that this is actually my wife's money and not mine ?   

Your post is a little confusing.  Was it in a joint account or not?

If not then it is all your taxable income and you will be liable to pay the tax due on the interest.

Stubod

..if it's in your name it's your money. If it's in joint names then 50% of it is your money and you will need to pay tax accordingly.

Zanderman

deaneo4 said:

Can anyone help me, I have just learned that I have been taxed £400 on the Building Society saving I made last year. I was obviously oblivious to the fact that being a higher rate tax payer I was only allowed £500 per year, tax free & not the £1500.(we never normally save !)   The money was not mine it was my wife's and she does not work, therefore I'm sure, as she is paying zero tax on no earnings she would be allowed to earn all of this money tax free ? We only invested it under my both names to secure the £85k FSA safeguard. Is there anyway I can prove to HMRC that the funds were innocently invested based on the above and provide evidence that this is actually my wife's money and not mine ?   

Short answer?  Probably not.  If the accounts concerned were in your name or you were jointly liable it doesn't matter 'whose' money was being saved.  It was saved solely and/or jointly in your name.  So in tax terms the interest is your liability.

The tax free interest allowance, for basic rate taxpayers, is 1000 and for higher is 500.  Not sure where you get the 1500 figure from.

If you're a higher rate tax payer and have been charged 400 in tax then that implies a total interest of 1500 (500 tax free and 1000 taxed at 40%) which is presumably where your figure comes from. 

Even a basic rate tax payer would be charged tax on 500 of that.  So you should have been expecting to pay some tax.

If your wife has no income she would have no tax liability at all as she would be well under the personal allowance.  

(That's a lot of money to have in cash savings btw!  Especially if the 1500 interest is only on half of it.)

burner04

Suggest put more in equities via pension or ISA rather than cash savings!

newatc

deaneo4 said:

Can anyone help me, I have just learned that I have been taxed £400 on the Building Society saving I made last year. I was obviously oblivious to the fact that being a higher rate tax payer I was only allowed £500 per year, tax free & not the £1500.(we never normally save !)   The money was not mine it was my wife's and she does not work, therefore I'm sure, as she is paying zero tax on no earnings she would be allowed to earn all of this money tax free ? We only invested it under my both names to secure the £85k FSA safeguard. Is there anyway I can prove to HMRC that the funds were innocently invested based on the above and provide evidence that this is actually my wife's money and not mine ?   

Zero chance of convincing them it's not your interest.
More bad news, they will probably assume you will have the same bank interest (plus inflation) this year so your tax code will have been adjusted accordingly. 

deaneo4

Zanderman said:

deaneo4 said:

Can anyone help me, I have just learned that I have been taxed £400 on the Building Society saving I made last year. I was obviously oblivious to the fact that being a higher rate tax payer I was only allowed £500 per year, tax free & not the £1500.(we never normally save !)   The money was not mine it was my wife's and she does not work, therefore I'm sure, as she is paying zero tax on no earnings she would be allowed to earn all of this money tax free ? We only invested it under my both names to secure the £85k FSA safeguard. Is there anyway I can prove to HMRC that the funds were innocently invested based on the above and provide evidence that this is actually my wife's money and not mine ?   

Short answer?  Probably not.  If the accounts concerned were in your name or you were jointly liable it doesn't matter 'whose' money was being saved.  It was saved solely and/or jointly in your name.  So in tax terms the interest is your liability.

The tax free interest allowance, for basic rate taxpayers, is 1000 and for higher is 500.  Not sure where you get the 1500 figure from.

If you're a higher rate tax payer and have been charged 400 in tax then that implies a total interest of 1500 (500 tax free and 1000 taxed at 40%) which is presumably where your figure comes from. 

Even a basic rate tax payer would be charged tax on 500 of that.  So you should have been expecting to pay some tax.

If your wife has no income she would have no tax liability at all as she would be well under the personal allowance.  

(That's a lot of money to have in cash savings btw!  Especially if the 1500 interest is only on half of it.)

Thanks for your help and as stated the only reason I did not put all of the funds into her name was based on the state of our economy and the stability of our banking, hence making sure we have the £85k x 2 cover. Noting your advice on savings -  

eskbanker

deaneo4 said:
the only reason I did not put all of the funds into her name was based on the state of our economy and the stability of our banking, hence making sure we have the £85k x 2 cover.

Nothing stopping her/you from putting the money into multiple institutions (in her name) to achieve that - the FSCS £85K protection is per institution per person....

deaneo4

Unfortunately there were not many favourable rates available at the time, hence my choice. However will now think before I move off into first gear - Obviously there are little safe investments around as we stand.  

JGB1955

There are plenty of safe investments covered by the £85K limit - the problem is that they may not pay well.  What do you want.. security or risk?