Help retired couple with savings

friolento

If the partner in this couple doesn't have any income by themselves, or only  low income, they can earn up to £18,750 without having to pay income tax

jonnypb

Brie said:

What does the other earn?  If there's one on a much lower amount then put the savings in their name in higher interest accounts to ensure that when interest is earned it's at a lower tax rate.  Maybe the one in the higher tax rate could have enough in a savings account to stay just below the PSA.  

 xylophone said:

And what about the other?

It  is possible that it would make more sense from the tax point of view for the savings outside the ISA to be held in the other's sole name.

I didn't think of that, they have a very small pension.  I think the money that they have is in joint accounts though, so possibly open a savings account just in her name?

BikingBud said:
 Do they have children and grandchildren?

Might it be better depending upon the size of their estate to distribute some of this surplus income now rather than just accumulating more?

Yes they do, but are there not implications if they just give larger amounts of money away to children/grand children

friolento said:

How old are either of them?

Both over 80

allegro120 said:
 Hard to say without knowing the income of the other one, but as you've said, use ISA allowance first and the rest into best paying EA accounts.  If £40k goes to ISA there will be only £45k left to put into EAs which will generate £2,250 interest @5%.  It is unlikely that 5% will be around in near future so the value of taxable interest will probably be less. I personally wouldn't go for PB lottery because I prefer to know what I'm getting, I'd rather earn interest and pay tax on it. The other way to reduce tax is to open regular savers, this will delay the interest until next year when the new ISA allowance kicks in. 

The other has a tiny pension.

Some food for thought and good advice.

friolento

If one partner has a tiny pension, then all savings should be in their name to avoid tax.

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

xylophone

then all savings should be in their name to avoid tax.

Not necessarily all - a gloomy thought I know but a married couple should bear in mind the transferable ISA allowance on death.

In the case of the couple I cited, both have fairly substantial ISA savings as well as the bulk of other cash savings in the wife's name.

jonnypb

xylophone said:

then all savings should be in their name to avoid tax.

Not necessarily all - a gloomy thought I know but a married couple should bear in mind the transferable ISA allowance on death.

In the case of the couple I cited, both have fairly substantial ISA savings as well as the bulk of other cash savings in the wife's name.

So the inherited ISA allowance would allow the other partner to inherit the full ISA of the partner who has passed away and be able to use that on top of your existing personal ISA allowance?

So say if one passed away with a £40k ISA, then for that year the other partner would have their own £20k allowance, plus the inherited £40k, making their ISA allowance for that year £60k?

BikingBud

@jonnypb

See here:

If you make regular payments
You can make regular payments to another person, for example to help with their living costs. There’s no limit to how much you can give tax free, as long as:

• you can afford the payments after meeting your usual living costs

• you pay from your regular monthly income

These are known as ‘normal expenditure out of income’. They can include:

• paying rent for your child

• paying into a savings account for a child under 18

• giving financial support to an elderly relative

If you’re giving gifts to the same person, you can combine ‘normal expenditure out of income’ with any other allowance, except for the small gift allowance.
For example, you can give your child a regular payment of £60 a month (a total of £720 a year) as well as using your annual exemption of £3,000 in the same tax year.

So they could pass on money to children or grandchildren as part of a regular and documented activity:

https://community.hmrc.gov.uk/customerforums/pt/88065a34-bc9e-ee11-a81c-002248004b84

xylophone

So the inherited ISA allowance would allow the other partner to inherit the full ISA of the partner who has passed away and be able to use that on top of your existing personal ISA allowance?

So say if one passed away with a £40k ISA, then for that year the other partner would have their own £20k allowance, plus the inherited £40k, making their ISA allowance for that year £60k?

Regardless of whether or not the spouse inherits the money/assets in the ISA, the allowance is transferable.

https://www.which.co.uk/money/savings-and-isas/isas/cash-isas/can-you-inherit-an-isa-aytHW5W6vWrK

https://www.gov.uk/individual-savings-accounts/inheriting-an-isa-from-your-spouse-civil-partner#:~:text=directly to them-,You can inherit their ISA allowance.,civil partner's ISA for details.