Making use of ISA allowances for UNMARRIED Couples

Sheriff_Fatmen

My partner (of several years, joint home owners, and joint current account holders) does not have enough spare funds to take full advantage of their (£20k) ISA allowance for this tax year.  I have sufficient funds to fill both of our ISA's this tax year.

Can anyone explain the best legal route to get my £20k into their ISA?
A link to relevant HMRC guidance would be useful.
(Scottish tax payers FWIW)

e.g.  Can I just transfer £20k into our joint current account and they transfer the £20k into their ISA from there?

The only relevant guidance I can find is this paragraph from the web link below:

".....Financially linked couples

There are certain tax-efficient steps that unmarried but committed couples whose finances are linked (through a jointly owned property, for example) can take, which would not be appropriate for more casual couples who keep their finances separate.

The central idea is that where one partner earns much more than the other, the high earner can fund the lower earner’s tax-efficient investment opportunities such as individual savings accounts (ISA). As Kimche says: “You don’t need to be married to do this, but you certainly need to be long-term committed!”............."

Beware these tax traps for unmarried couples (ii.co.uk)

xylophone

Can I just transfer £20k into our joint current account and they transfer the £20k into their ISA from there?

Yes - why not?

In effect, you have made your partner a present of £20,000.

He/she can do whatever he/she wishes with the money, including betting it on the 2.30 at Kempton or taking a luxury holiday in the Seychelles....

Keep a note with your will of date and amount gifted in case of an unfortunate event requiring IHT calculation.

xylophone

Can I just transfer £20k into our joint current account and they transfer the £20k into their ISA from there?

Yes - why not?

In effect, you have made your partner a present of £20,000.

He/she can do whatever he/she wishes with the money, including betting it on the 2.30 at Kempton or taking a luxury holiday in the Seychelles....

Keep a note with your will of date and amount gifted in case of an unfortunate event requiring IHT calculation.

molerat

You cannot get your £20K into their ISA for your tax efficient benefit.  You can though gift them £20K to put into their ISA which is their money to do with as they wish.

Sheriff_Fatmen

Thanks for speedy replies.

@xylophone....why not?  Well I thought there was a max £3k Gift Allowance per tax year? and that exceeding this may affect either theirs or my own tax liabilities?

Would it be better to administer the transfer via our joint account or direct from my own account; pro's or con's? 

km1500

there is no gift tax on the UK you can gift as much as you want to anyone you want and there is no tax to pay

note: iht may be due if you die within 7 years

ColdIron

Sheriff_Fatmen said:

Well I thought there was a max £3k Gift Allowance per tax year?

Only in relation to Inheritance Tax liability. And even then it only applies to the estate of the deceased and not personal taxation

Sheriff_Fatmen

thanks for all replies

@ColdIron, I now note that there is no income tax liability for the recipient of the gift (i had thought that there was above the £3k) and that the IHT would possibly apply (above the £3k threshold) but only if I die within 7 years

ColdIron

Yes and also only if your estate was over the £325,000 threshold

As a general rule you can gift whoever you like as much as you like with no immediate liability

badmemory

If it is in a joint account it is owned 50/50 anyway.  But please make sure wills & POAs are in place to protect each others interests.

Albermarle

Well I thought there was a max £3k Gift Allowance per tax year? 

A very common misunderstanding, mainly due to the way articles about inheritance tax in the media are so badly written/explained.