Non tax paying partner. Will we avoid savings tax threshold if savings accounts in her name?

MStancliffe

if I open a new fixed savings account, with £85k, in my wife’s name, who is a non-taxpayer, then shouldn’t the interest be tax free?

eskbanker

Interest wouldn't strictly be tax-free as such (unless within an ISA, but contribution limits apply), but is likely to be taxable at 0%, i.e. it would count as taxable income but if within the various allowances then no tax would actually be payable.  What would her total annual income from all sources be?

MStancliffe

eskbanker said:

Interest wouldn't strictly be tax-free as such (unless within an ISA, but contribution limits apply), but is likely to be taxable at 0%, i.e. it would count as taxable income but if within the various allowances then no tax would actually be payable.  What would her total annual income from all sources be?

She earns nothing from anywhere else.

RG2015

MStancliffe said:

if I open a new fixed savings account, with £85k, in my wife’s name, who is a non-taxpayer, then shouldn’t the interest be tax free?

Assuming no other taxable earnings, there should be no tax payable on annual interest up to £18,570.

See the information on the link below.


https://www.gov.uk/apply-tax-free-interest-on-savings

Dazed_and_C0nfused

RG2015 said:

MStancliffe said:

if I open a new fixed savings account, with £85k, in my wife’s name, who is a non-taxpayer, then shouldn’t the interest be tax free?

Assuming no other taxable earnings, there should be no tax payable on annual interest up to £18,570.

See the information on the link below.


https://www.gov.uk/apply-tax-free-interest-on-savings

In reality unless the op is a higher rate payer it's likely to be £17,310 as the wife will have a reduced Personal Allowance.

Still an awful lot of interest to receive even at slightly increased current interest rates 😊

RG2015

Dazed_and_C0nfused said:

RG2015 said:

MStancliffe said:

if I open a new fixed savings account, with £85k, in my wife’s name, who is a non-taxpayer, then shouldn’t the interest be tax free?

Assuming no other taxable earnings, there should be no tax payable on annual interest up to £18,570.

See the information on the link below.


https://www.gov.uk/apply-tax-free-interest-on-savings

In reality unless the op is a higher rate payer it's likely to be £17,310 as the wife will have a reduced Personal Allowance.

Still an awful lot of interest to receive even at slightly increased current interest rates 😊

Doesn’t this assume the marriage tax allowance transfer of £1,260 which the op hasn’t mentioned.

Clearly, unless the op is a higher rate taxpayer, they are entitled to claim it, but this is not yet a given.

Edit. Yes, given the amounts, its effect on the tax liability is likely not to come into play.

Dazed_and_C0nfused

They haven't mentioned it but as a MSE forum member with a spouse who apparently has no taxable income it seems unlikely that the op wouldn't be aware of it and have already persuaded the spouse to have applied!

RG2015

Dazed_and_C0nfused said:

They haven't mentioned it but as a MSE forum member with a spouse who apparently has no taxable income it seems unlikely that the op wouldn't be aware of it and have already persuaded the spouse to have applied!

Thanks.

I am just chuffed that I got my numbers right! 

MStancliffe

Dazed_and_C0nfused said:

They haven't mentioned it but as a MSE forum member with a spouse who apparently has no taxable income it seems unlikely that the op wouldn't be aware of it and have already persuaded the spouse to have applied!

Correct. We have got marriage allowance. I am newly retired with private pension in basic tax band. I suppose the key is to put our savings into a sole savings account in my wife’s name even though the savings are essentially joint. I assume if it were a joint account then 50% of interest would be taxable. Just wanted to make sure it was above board. 

where_are_we

Also put £2880 net grossed up to £3600 in a SIPP if your wife is near 55. When she is 55 she can withdraw and the proceeds will not be taxed unless her total earned income exceeds her annual personal tax allowance minus the marriage allowance. If her earned income was low enough this could result in a gain of £720 on a £2880 contribution.

RG2015

where_are_we said:

Also put £2880 net grossed up to £3600 in a SIPP if your wife is near 55. When she is 55 she can withdraw and the proceeds will not be taxed unless her total earned income exceeds her annual personal tax allowance minus the marriage allowance. If her earned income was low enough this could result in a gain of £720 on a £2880 contribution.

This sounds interesting. How does it work and where does the figure of £2,880 come from?