Fixed Rate 1 year bond - Joint or Single - Tax implications

[Deleted User]

I am looking at opening either 1 or 2 fixed rate 1 year bonds with Vanquis. I am a low rate tax payer and have worked out that I can invest £16,800 which would earn interest of £999.60 so just under the £1k allowance. My husband is a high rate tax payer so I can invest just over £8k for him to keep him under the £500 allowance. I know the account pays the interest gross and it is our responsibility to declare the tax (not that we complete tax returns anymore). I just wondered is that enough, to know that we will earn just under £1500 if we combine the monies into one account therefore within the allowance.

We have been building our savings back up after doing our house up and paying off our mortgage etc and have for the last number of years just put money in Premium Bonds because the interest rates were so low but now I have persuaded him to put money into savings to earn interest as despite holding the full amount he has only won approx £600 in the last year. Time to move the monies I think.

Albermarle

If you have a joint account, the interest will be split 50:50 for tax purposes.

know the account pays the interest gross and it is our responsibility to declare the tax (not that we complete tax returns anymore). 
You do not have to declare anything. The savings provider will report the interest to HMRC.

The return from Premium Bonds will be variable and unpredicatable. However the more you have and the longer you keep them the more likely you will get around 3.9% on average. As they are tax free they are better for higher rate taxpayers.

[Deleted User]

We started building his pot in Apr 22 and he had the full amount in by May 22, we had previously been saving in my name but I started transferring lump sums over to him. So between Apr 22 and Oct 23 he has earnt £1550 in wins. I was basing the £600 winnings over a 12 month period. Having said that we won't be touching his PB's yet the funds will be coming out of my PB pot which is made up of a variety of amounts. I use PB's to save for various things such as holidays etc. I was initially looking at an ISA but then read that if you keep within the Tax allowance a regular saving account can have better interest rates which is what led me to Vanquis. Once the bonds matures then I guess we will probably stick the monies in ISAs.

subjecttocontract

Albermarle said:

If you have a joint account, the interest will be split 50:50 for tax purposes.

know the account pays the interest gross and it is our responsibility to declare the tax (not that we complete tax returns anymore). 
You do not have to declare anything. The savings provider will report the interest to HMRC.

The return from Premium Bonds will be variable and unpredicatable. However the more you have and the longer you keep them the more likely you will get around 3.9% on average. As they are tax free they are better for higher rate taxpayers.

The published rate of return for premium bonds is 4.65% not 3.9%

Dazed_and_C0nfused

subjecttocontract said:

Albermarle said:

If you have a joint account, the interest will be split 50:50 for tax purposes.

know the account pays the interest gross and it is our responsibility to declare the tax (not that we complete tax returns anymore). 
You do not have to declare anything. The savings provider will report the interest to HMRC.

The return from Premium Bonds will be variable and unpredicatable. However the more you have and the longer you keep them the more likely you will get around 3.9% on average. As they are tax free they are better for higher rate taxpayers.

The published rate of return for premium bonds is 4.65% not 3.9%

I think the 3.9% might be excluding the two £1million pound prizes.

Albermarle

subjecttocontract said:

Albermarle said:

If you have a joint account, the interest will be split 50:50 for tax purposes.

know the account pays the interest gross and it is our responsibility to declare the tax (not that we complete tax returns anymore). 
You do not have to declare anything. The savings provider will report the interest to HMRC.

The return from Premium Bonds will be variable and unpredicatable. However the more you have and the longer you keep them the more likely you will get around 3.9% on average. As they are tax free they are better for higher rate taxpayers.

The published rate of return for premium bonds is 4.65% not 3.9%

It is, but in many debates on here it is generally  accepted that a better way of presenting the rate is as follows:
3.8/3.9% + an infinitesimally small chance of winning a Million.

As a holder of £50K in bonds will on average win a Million every 43,000 years, it is best to discount it from the real return.

subjecttocontract

Let's not forget it's tax free.
If you paid 40% tax on the interest, you'd need to achieve between 7.75% - 6.50%

Albermarle

subjecttocontract said:

Let's not forget it's tax free.
If you paid 40% tax on the interest, you'd need to achieve between 7.75% - 6.50%

Yes can be good for higher rate taxpayers.

subjecttocontract

It can also be good for 20% taxpayers.