460k for 5 months!

Andrew68

The wife and I have sold our house and have 460k for 5-6 months whilst we wait for our house to be built. 

I want to maximise the interest but keep the funds in instant access with monthly interest payments.
We plan to distribute between ; metro, cahoot & paragon given the 85k protection limit and these 3 offer monthly interest payments and instant access.
i work and earn over 60k but my wife doesn’t.
can someone help me out with whether we will pay tax on the interest given we will only have the interest for 5 or so months ? 
The interest is going towards our rent while we wait for our house to be ready! 

Thanks folks 🙏🏻 

Flugelhorn

what is the interest rate? - you can get £500 tax free but your wife can get rather more 

cloud_dog

Andrew68 said:

The wife and I have sold our house and have 460k for 5-6 months whilst we wait for our house to be built. 

I want to maximise the interest but keep the funds in instant access with monthly interest payments.
We plan to distribute between ; metro, cahoot & paragon given the 85k protection limit and these 3 offer monthly interest payments and instant access.
i work and earn over 60k but my wife doesn’t.
can someone help me out with whether we will pay tax on the interest given we will only have the interest for 5 or so months ? 
The interest is going towards our rent while we wait for our house to be ready! 

Thanks folks 🙏🏻 

You get 6 months temporary protection up to £1m, as far as I recollect.

Ocelot

Andrew68 said:

The wife and I have sold our house and have 460k for 5-6 months whilst we wait for our house to be built. 

I want to maximise the interest but keep the funds in instant access with monthly interest payments.
We plan to distribute between ; metro, cahoot & paragon given the 85k protection limit and these 3 offer monthly interest payments and instant access.
i work and earn over 60k but my wife doesn’t.
can someone help me out with whether we will pay tax on the interest given we will only have the interest for 5 or so months ? 
The interest is going towards our rent while we wait for our house to be ready! 

Thanks folks 🙏🏻 

Let's say you get 4.7% on 460k, that's 21,620. Over 5 months it will be £9,008. The Personal savings allowance (amount you can receive tax free) is £500 p.a. for a higher rate taxpayer, so you would be liable for 40% of 8,558 ie have to pay tax of £3,403. 

If your wife was to save in her name, the tax would be significantly smaller, and even less if you put  the maximum of 20k in an ISA.

ColdIron

The interest is potentially taxable regardless of how long it takes to earn. As a higher rate tax payer you would pay 40% on it so you want to avoid that. If your wife has no earnings she can earn £18,570 without tax

https://www.moneysavingexpert.com/savings/tax-free-savings

You don't need monthly easy access accounts, if you close them after 6 months all the interest due will be paid. This might allow you to cast your net a bit wider

Mark_d

In the 5 months you can expect to earn around £10k in interest, so yes tax will be due on this.  Making use of ISA allowances and putting the accounts in your wife's name would reduce the tax liability.

ColdIron

Putting the accounts in the wife's name would eliminate the tax entirely without need for an ISA

Andrew68

Thanks folks 🙏🏻. 

@Coldiron;
I thought the standard allowance is £12,570 not £18,570 ????

in any case…..

I guess I need to open a few more temporary accounts for my wife then!
we have a cahoot account (5.12%) each and a metro bank (5.1%) and need her to open a paragon at (4.94%) 
then two more accounts paying a decent interest rate
 (any immediate recommendations folks ? )

but agree that we can widen our ‘net’ of banks given we will close the accounts once we pay to our house builder….

ColdIron

Andrew68 said:

Thanks folks 🙏🏻. 

@Coldiron;
I thought the standard allowance is £12,570 not £18,570 ????

Read the article in the link I provided. A non earner has three separate 'allowances' available to them

1. The Personal Allowance - £12,570 (tax free)
2. The Starting Rate for Savings - £5,000 (taxed at 0%)
3. The Personal Savings Allowance - £1,000 (taxed at 0%)

Total £18,570 taxed at £0

Andrew68

Mark_d said:

In the 5 months you can expect to earn around £10k in interest, so yes tax will be due on this.  Making use of ISA allowances and putting the accounts in your wife's name would reduce the tax liability.

How would tax be due on the 460k if I put it all in accounts in my wife’s name and in 5 months we earn approx 10k (an average of about 4.9%) in interest and her allowance is £12,570 ? 

sammyjammy

Andrew68 said:

Mark_d said:

In the 5 months you can expect to earn around £10k in interest, so yes tax will be due on this.  Making use of ISA allowances and putting the accounts in your wife's name would reduce the tax liability.

How would tax be due on the 460k if I put it all in accounts in my wife’s name and in 5 months we earn approx 10k (an average of about 4.9%) in interest and her allowance is £12,570 ? 

It wouldn't, that poster was incorrect.