Hight Tax Payer - Personal savings allowance for ISA?

tooafraid2ask

My Husban is a high tax payer  45%. So as I understand he doesn't have any personal savings allowance for ISA. we have some savings sitting in the bank around £200K playing only 1.7% interest.  

I can see some deals  like the one from "Paragon Bank" paying 5.16% interest rate.
I don't work at the moment so my income is zero. Can I open an account on my name and transfert all the money to this Bank account and been able benfit of the interest of tax free Savings? 

Dazed_and_C0nfused

tooafraid2ask said:

My Husban is a high tax payer  45%. So as I understand he doesn't have any personal savings allowance for ISA. we have some savings sitting in the bank around £200K playing only 1.7% interest.  

I can see some deals  like the one from "Paragon Bank" paying 5.16% interest rate.
I don't work at the moment so my income is zero. Can I open an account on my name and transfert all the money to this Bank account and been able benfit of the interest of tax free Savings? 

ISA's are tax free, non ISA interest from a bank or building society will all be taxable.

As a 45% payer the interest will all be taxed at that rate with none at savings nil rate 0% (aka PSA).

You have your Personal Allowance to use (£12,570) and then the savings starter rate band where the first £5,000 of interest (for someone with no other income) is taxed at 0%.

And after that had been used you have the savings nil rate band of another £1,000 at 0%.

However 5.16% on £200k won't even use all your Personal Allowance so the 0% rate bands won't be of any help to you.

Also, presumably your husband will be aware that once it's your name you can do what you want with the capital and any interest.

Ayr_Rage

ISA interest is completely free from tax no matter what your marginal rate is, so you husband can use his £20,000 pa allowance just like anyone else.

If he wishes to gift you the money then you can use your annual personal allowance and savings allowance.

Why one earth have you left such a large sum in such a poor account ?

Dazed_and_C0nfused

In December 2023 I think the op was self employed earning £5k/year so the interest will take them closer to paying tax on it.

But a bit of 20% tax is better than a lot of 45%!

tooafraid2ask

Ayr_Rage said:

ISA interest is completely free from tax no matter what your marginal rate is, so you husband can use his £20,000 pa allowance just like anyone else.

If he wishes to gift you the money then you can use your annual personal allowance and savings allowance.

Why one earth have you left such a large sum in such a poor account ?

 Hi, I don't think what you are saying is right. this is the info I found:

• basic rate taxpayers (20%) can earn £1,000 in tax-free interest each year
• higher rate taxpayers (40%) can earn £500 in tax-free interest each year
• additional rate taxpayers (45%) don’t get an allowance

Based on this my husban will have to pay 45% Tax on any interest income generated from the savings 

On-the-coast

The new ISA year is almost here. 

Between now and April 6th you could open 2 cash isa’s each and have 4x£20k = 80k of tax free savings. That’s about £4000 tax free at 5%. 

You’ll get less interest if you want to save flexibility but still massively better than your current rates. 

Dazed_and_C0nfused

tooafraid2ask said:

Ayr_Rage said:

ISA interest is completely free from tax no matter what your marginal rate is, so you husband can use his £20,000 pa allowance just like anyone else.

If he wishes to gift you the money then you can use your annual personal allowance and savings allowance.

Why one earth have you left such a large sum in such a poor account ?

 Hi, I don't think what you are saying is right. this is the info I found:

• basic rate taxpayers (20%) can earn £1,000 in tax-free interest each year
• higher rate taxpayers (40%) can earn £500 in tax-free interest each year
• additional rate taxpayers (45%) don’t get an allowance

Based on this my husban will have to pay 45% Tax on any interest income generated from the savings 

That quote is purely referring to the savings nil rate band (up to £1,000 taxable interest which can be taxed at 0%).

Your husband can still use Cash ISA's (and you can if you wish).  Interest from Cash ISA's is exempt from tax.

And some basic rate payers will be able use the savings starter rate band (up to £5,000 taxable interest taxed at 0%).

grumbler

tooafraid2ask said:

Ayr_Rage said:

ISA interest is completely free from tax no matter what your marginal rate is, so you husband can use his £20,000 pa allowance just like anyone else.

If he wishes to gift you the money then you can use your annual personal allowance and savings allowance.

Why one earth have you left such a large sum in such a poor account ?

 Hi, I don't think what you are saying is right. this is the info I found:

• basic rate taxpayers (20%) can earn £1,000 in tax-free interest each year
• higher rate taxpayers (40%) can earn £500 in tax-free interest each year
• additional rate taxpayers (45%) don’t get an allowance

Based on this my husban will have to pay 45% Tax on any interest income generated from the savings 

What exactly is not right?

The info you found is for the interest generated outside of ISAs.

MSE:

Tax-free savings & the starting savings rate

Cash ISAs

tooafraid2ask said:

. Can I open an account on my name and transfert all the money to this Bank account and been able benfit of the interest of tax free Savings? 

Yes, you can, but it's still worth putting £20K in his ISA in this financial year at slightly lower rate to make use of this year's ISA allowance.
https://moneyfactscompare.co.uk/isa/easy-access-cash-isas/?quick-links-first=false

Also, as the rates are dropping, it's worth considering fixed-rate accounts (ISA and not) for a part of your money.

RobfromCornwall

tooafraid2ask said:

Ayr_Rage said:

ISA interest is completely free from tax no matter what your marginal rate is, so you husband can use his £20,000 pa allowance just like anyone else.

If he wishes to gift you the money then you can use your annual personal allowance and savings allowance.

Why one earth have you left such a large sum in such a poor account ?

 Hi, I don't think what you are saying is right. this is the info I found:

• basic rate taxpayers (20%) can earn £1,000 in tax-free interest each year
• higher rate taxpayers (40%) can earn £500 in tax-free interest each year
• additional rate taxpayers (45%) don’t get an allowance

Based on this my husban will have to pay 45% Tax on any interest income generated from the savings 

ISA interest is always tax free.  

Arthurian

Your husband can put £20,000 each tax year in an ISA and will not have to pay tax on the interest.  You can do the same, so between you you can put £40,000 in an ISA each tax year.  The tax year ends on 5th April, so before then you can each put £20,000 in an ISA, then on the 6th April put another £20,000 each in an ISA. The snippet you found is not talking about ISA money.

Albermarle

we have some savings sitting in the bank around £200K playing only 1.7% interest

With current interest rates in the 4 to 5% region, you are losing £6K pa .

In any case it is a lot of cash, have you considered investing some of it, or adding some to a pension ?