460k for 5 months!

ColdIron

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

Mark_d

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 ? 

Apologies.  I had forgotten about the Personal Allowance

Andrew68

ColdIron said:

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

Thanks and I’ve read the link about the other allowances!

another complication with my wife is she left her job at the end of November having earned; 10,544 by month 8 according to her p45. 

(Incidentally, it states on her p45 ; £420.80 in tax on £10544 earnings ? Why when her tax code is 1265L ?)
her annual salary was 15,180/year so do they annualise the tax you pay ?)

if we complete the sale in late February (approx) will we potentially pay tax on interest until 1st April because it has gone above her allowance (probably not if the allowance is £18570 !  ?)

Sincerely appreciate all your comments folks! 🙏🏻🙏🏻

allegro120

Andrew68 said:

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 ? )

Ulster Loyalty Saver - 5,2%
Synergy Online Easy Access issue 69 - 5.1%
Leeds BS Online Access issue 53 - 5.1%
Charter Easy Access issue 47 - 5.07%
Virgin Defined Access issue 20 - 5.07%
Kent Reliance Easy Access issue 66 - 5.06%
Close Brother Easy Access issue 2 - 5.05%
Paragon Double Access issue 5 - 5.05%

ccluedo

No need for lots of accounts. Up to 1 million is protected for 6 months after a life event such as selling a home.

Dazed_and_C0nfused

Andrew68 said:

ColdIron said:

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

Thanks and I’ve read the link about the other allowances!

another complication with my wife is she left her job at the end of November having earned; 10,544 by month 8 according to her p45. 

(Incidentally, it states on her p45 ; £420.80 in tax on £10544 earnings ? Why when her tax code is 1265L ?)
her annual salary was 15,180/year so do they annualise the tax you pay ?)

if we complete the sale in late February (approx) will we potentially pay tax on interest until 1st April because it has gone above her allowance (probably not if the allowance is £18570 !  ?)

Sincerely appreciate all your comments folks! 🙏🏻🙏🏻

That is an important fact not previously mentioned!!!

That £10,544 will use up £10,544 of her Personal Allowance leaving her £2,026 available to be used by the interest.

That is the only "allowance" she had.

The next £5,000 interest is taxed at 0% (savings starter rate band).

And after that the next £1,000 interest will also be taxed at 0% (savings nil rate band).

The £420 will no doubt be correct at month 8 (that's how pay as you earn works) but if she doesn't owe anything come the end of the tax year it will be refunded.  Either automatically by HMRC or when she files her Self Assessment return if she has interest of £10k or more.

If she owes tax but less than £420 then the difference will be refunded.

Do you know what the additional tax code allowances above £12,570 relate to?

ColdIron

Andrew68 said:

ColdIron said:

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

another complication with my wife is she left her job at the end of November having earned; 10,544 by month 8 according to her p45. 

(Incidentally, it states on her p45 ; £420.80 in tax on £10544 earnings ? Why when her tax code is 1265L ?)
her annual salary was 15,180/year so do they annualise the tax you pay ?)

PAYE assumes you will get 12 months of roughly equal salary so taxes the annual salary monthly by 1/12th. If she left employment after 8 months she might even be due some tax back. There is a better poster here than me at picking these things apart. Perhaps @Dazed_and_C0nfused might care to comment

if we complete the sale in late February (approx) will we potentially pay tax on interest until 1st April because it has gone above her allowance (probably not if the allowance is £18570 !  ?)

Any interest paid before 6th April is potentially taxable but with £18,570 available it's unlikely any tax will be due

This works in your favour as from 06/04/2024 your 'allowances' are reset

Andrew68

Dazed_and_C0nfused said:

Andrew68 said:

ColdIron said:

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

Thanks and I’ve read the link about the other allowances!

another complication with my wife is she left her job at the end of November having earned; 10,544 by month 8 according to her p45. 

(Incidentally, it states on her p45 ; £420.80 in tax on £10544 earnings ? Why when her tax code is 1265L ?)
her annual salary was 15,180/year so do they annualise the tax you pay ?)

if we complete the sale in late February (approx) will we potentially pay tax on interest until 1st April because it has gone above her allowance (probably not if the allowance is £18570 !  ?)

Sincerely appreciate all your comments folks! 🙏🏻🙏🏻

That is an important fact not previously mentioned!!!

That £10,544 will use up £10,544 of her Personal Allowance leaving her £2,026 available to be used by the interest.

That is the only "allowance" she had.

The next £5,000 interest is taxed at 0% (savings starter rate band).

And after that the next £1,000 interest will also be taxed at 0% (savings nil rate band).

The £420 will no doubt be correct at month 8 (that's how pay as you earn works) but if she doesn't owe anything come the end of the tax year it will be refunded.  Either automatically by HMRC or when she files her Self Assessment return if she has interest of £10k or more.

If she owes tax but less than £420 then the difference will be refunded.

Do you know what the additional tax code allowances above £12,570 relate to?

Not sure what you mean by ‘additional tax code’ above £12570 relates to’  do you mean why is her tax code 1265L which in effect means £12650 ?  I am not sure🤷‍♂️ 

thanks so much for all the other comments and great to know we only need one bank account for 6 months (major life event!) which makes sense….
you folks on here have been so helpful ! 

AmityNeon

Andrew68 said:

another complication with my wife is she left her job at the end of November having earned; 10,544 by month 8 according to her p45.

(Incidentally, it states on her p45 ; £420.80 in tax on £10544 earnings ? Why when her tax code is 1265L ?)

her annual salary was 15,180/year so do they annualise the tax you pay ?)

For PAYE, the allocated Personal Allowance (represented by the tax code) is pro-rated per payment period, so earnings above the monthly threshold are subject to tax. Remaining on the same PAYE scheme can facilitate refunds via PAYE in subsequent months (if gross earnings to date fall below the cumulative monthly tax threshold), but as your wife left employment, she will be entitled to a refund of overpaid tax (if any) from HMRC directly, after the tax year.

Andrew68 said:

if we complete the sale in late February (approx) will we potentially pay tax on interest until 1st April because it has gone above her allowance (probably not if the allowance is £18570 !  ?)

That £18,570 is reduced by £10,544 in earnings, so your wife can earn £8,026 in interest before being liable for tax on interest this tax year, which given the current timescales, should be absolutely fine.

Veteransaver

If your wife isn't going to work in the 2024-2025 tax year,  if you put most of the savings in accounts in her name that won't pay out until 2024-2025, so an annually paying account basically, that would work.
You could work it though to try and max out the £1000 limit for this year.