tax on savings 2 December 2022 at 10:49AM in Savings & investments 7 replies 415 views

ruralrob228

Hi. We are in the fortunate position that due to inheritance we have around 140k of savings. Currently we have 100k in premium bonds and the rest in santander 123 account. As interest rates have risen, I know we should really move to a better higher rate account. We are thinking of putting 130k in a fixed rate for probably 18mnths or 2 years as we have seen a 4.65 rate and the rest in an easy access account. My question is if I have worked it out right the interest will be around 5k per year. As my Wife is registered self-employed (cake maker) but the last few years has barely earned £1k a year so is not currently paying any tax, if we put the savings in her name would we not pay tax on the interest? many thanks

Stubod

..you can earn up to your basic rate tax allowance of £12,570, then a further £1000 of savings interest is tax free before you need to pay tax.

If you have no other income there is an allowance of up to a further £5k 'ish, (best to google this).

If you earn over this and your spouse earns "nothing", then they can transfer part of their tax allowance to you, (ie they're tax allowance will go down by £1,260 and your will go up by the same amount..)

Albermarle

Yes if your wife only earns £1kpa, she can earn nearly £18K in interest before paying tax on it.
Tax-free savings: check if you're eligible - Money Saving Expert
Savings Interest Tax Payment - Page 2 — MoneySavingExpert Forum

Bigwheels1111

If the wife earns 1k she can get £17,570 of interest tax free.
If interest is over 10k she would need to fill out a tax return.
I will let you know how easy it is in 2024 as will go over 10k myself.
To be honest is very easy.
Apart from name address etc, there will only 2 boxes to fill out for my return.
Carers allowance and interest.

Downthedrain

Out of interest regarding the £10k threshold before needing to fill in a tax return - is this only taxable interest, or does it include interest from ISAs and other tax-free savings?

Albermarle

Downthedrain said:

Out of interest regarding the £10k threshold before needing to fill in a tax return - is this only taxable interest, or does it include interest from ISAs and other tax-free savings?

As far as HMRC are concerned, interest gained in an ISA, does not exist. So it is not included in the £10K threshold. 

RobM99

No tax on ISA, that's the whole point of them!

Dazed_and_C0nfused

Downthedrain said:

Out of interest regarding the £10k threshold before needing to fill in a tax return - is this only taxable interest, or does it include interest from ISAs and other tax-free savings?

If you declare ISA interest on a tax return you are turning something that is genuinely tax free/exempt into something that is taxable 😳