Savings interest and avoiding tax

JL2023

Hi all, 
I've searched for an answer all over the Internet but can't seem to find what I'm looking for. I'm hoping someone can help. 
I sold my house last year and made quite a bit of money. I've maxed out all the tax free savings options and have now already reached the £1k tax tree savings interest limit. 
Is it "allowed" that I transfer a sum of money to a family member so that they can put my money into a savings account in their name to gain tax free interest on their side? Would I need to declare the money being transferred over? 
I won't be charging them interest - I'll actually allow my family member to keep the interest earned (up to the £1k limit).
When I need the money back, can my family member transfer the money back to me with no limitations?
I of course don't want to do anything illegal or not allowed!
Many thanks in advance

masonic

There are a few issues with giving your money away in this fashion, but not the one you are imaginging. The main issue is if they decide not to give it back, or something befalls them that prevents them from giving it back (if they died, then legal ownership would pass to their heirs, if they lost capacity or were incapacitated, then the money could be controlled by an attorney or deputy, required to use it for their benefit only). The money will be considered legally theirs, so any interest they earned on it would have no consequences for you. However, there are things like deprivation of assets rules should you need to claim means-tested benefits and have been deemed to give your money away to qualify for these.

xylophone

If you are happy for the relation to keep the interest, why not just make him an interest free loan with the capital repayable on demand?

This can be evidenced with a simple agreement signed and dated by you both in the presence of a couple of witnesses.

 Or, If you don't want to earn interest, you could keep the cash in your own name in non interest bearing current accounts!

But why would you not want to earn interest?

Surely 20% or even 40% of the interest earned is better than nothing?

subjecttocontract

Why are you so scared of paying tax ?
As the previous poster has said paying tax and getting 60%-80% of something is better than getting 100% of nothing.
A classic case of the tax tail wagging the dog.
Paying taxes is important, it pays for education, health, defence and people arriving in boats amongst other things. 

ColdIron

There are issues with gifting (e.g. death) and you would be better off earning interest and paying a proportion of it as tax

But if you insist upon throwing the money away just put it in a 0% interest account, perhaps a second current account with your bank, and leave the card at home

Yorkie1

masonic said:

There are a few issues with giving your money away in this fashion, but not the one you are imaginging. The main issue is if they decide not to give it back, or something befalls them that prevents them from giving it back (if they died, then legal ownership would pass to their heirs, if they lost capacity or were incapacitated, then the money could be controlled by an attorney or deputy, required to use it for their benefit only). The money will be considered legally theirs, so any interest they earned on it would have no consequences for you. However, there are things like deprivation of assets rules should you need to claim means-tested benefits and have been deemed to give your money away to qualify for these.

It might also affect their eligibility, should they need to claim any means-tested benefits or similar.  

wmb194

JL2023 said:

Hi all, 
I've searched for an answer all over the Internet but can't seem to find what I'm looking for. I'm hoping someone can help. 
I sold my house last year and made quite a bit of money. I've maxed out all the tax free savings options and have now already reached the £1k tax tree savings interest limit. 
Is it "allowed" that I transfer a sum of money to a family member so that they can put my money into a savings account in their name to gain tax free interest on their side? Would I need to declare the money being transferred over? 
I won't be charging them interest - I'll actually allow my family member to keep the interest earned (up to the £1k limit).
When I need the money back, can my family member transfer the money back to me with no limitations?
I of course don't want to do anything illegal or not allowed!
Many thanks in advance

How much are we talking about? Placing your money in other peoples' accounts is rarely a good idea and it might cause issues for them them as well.

Have the options you've considered include using low coupon gilts? The interest they pay is taxed as usual but capital gains on gilts are tax free so if you buy them below par (£100) and hold them to maturity you will make a safe capital gain e.g., T26 in the link below. You can buy them via the stockbrokers that offer them e.g., iWeb (ultimately part of Lloyds).

https://www.yieldgimp.com/

Bigwheels1111

Just pay the tax job done. 
Three years ago you would have got £1500 on 100k.
Now best part of 5 0r 6k.
I'm breaching the 10k limit and will need to file a self assessment return next year.
I'm so happy about it.
3 years ago I got 3k, now over 12k.
Even if I had to pay tax I would still jump for joy.
But no tax for me.

JL2023

Thanks, all. 

It's not that I don't want the interest, of course I do! But it would really help out my family member if I let them keep the interest, especially as they'd be doing me a favour.
Don't get me wrong, I pay my taxes etc, but who likes paying tax?!
If I can avoid being taxed and also help out my family then I'll take it. 

Sounds like it's something that I can do without any issues (looking at around £30k transfer), and I know I can 100% trust them so that's also not an issue.

Thank you everyone for your input and advice. 

xylophone

and I know I can 100% trust them so that's also not an issue.

I would still suggest proceeding as outlined in my post above - it's more business like and you will both know where you are.

housebuyer143

Even my mum wrote up a short contract when I borrowed £30k. Definitely have something in writing stating it's a loan and when you want the payment returned. Have you never seen judge Judy!.