Interest/tax question

truescot

I know this is covered in some MSE articles and in other threads but I still find it confusing.

My wife (basic tax payer) and myself (higher bracket) have £46k in savings (currently in a 5.1% variable account), in addition to having maxed our ISA allowances this year. Are we likely to go over the tax threshold for this year and if so:

1. Is there a simple way to avoid this temporarily, as we intend to put most of it in ISAs next year?
2. If not, do I need to inform HMRC via a tax return or is this done by my savings provider (Chase)

Thanks 😊 

masonic

You would need to register for self assessment if you earned more than £10k in interest. If you are already on self assessment, then you will need to declare all of your income when you fill this in. In the absence of self assessment, HMRC will use returns from savings providers to calculate your liability and collect via tax code adjustment if possible.

£46k at 5% will generate a tax liability if you are both earning and paying tax on other income. It won't generate enough to put either of you into self assessment itself. The only way to avoid tax on this interest if you have to wait to get the money into an ISA is not earn the interest. Premium bonds might be worthwhile for you as a higher rate taxpayer. Winnings are tax free. Or keep savings in wife's name.

Dazed_and_C0nfused

truescot said:

I know this is covered in some MSE articles and in other threads but I still find it confusing.

My wife (basic tax payer) and myself (higher bracket) have £46k in savings (currently in a 5.1% variable account), in addition to having maxed our ISA allowances this year. Are we likely to go over the tax threshold for this year and if so:

1. Is there a simple way to avoid this temporarily, as we intend to put most of it in ISAs next year?
2. If not, do I need to inform HMRC via a tax return or is this done by my savings provider (Chase)

Thanks 😊 

A lot will depend on how much basic rate tax your wife is paying.  If this is from a job or pension then if she is paying basic rate tax on less than £5,000 of her income she would have some of the savings starter rate band available.

Beddie

Premium Bonds would be a good choice to avoid paying tax on interest. Then fill up your ISAs in April.

truescot

Thanks for the comments. Reassuring to know there is nothing I am missing,

To clarify, my wife earns over £17570 so doesn't qualify for the savings starter rate band.

I reckon the best option is put 9kish in a savings account in my name and put the rest in my wife's name and just take the tax hit. I'll then put the 2 x 20k in ISAs in April.

The only other options seems to be PB but seems a bit of a faff for a few months with no real guarantee of a return which will be better than my wife's (taxed) interest...

masonic

PB aren't going to be optimal assuming you have average luck or worse. If you were forced to pay higher rate tax on the interest it would be different.

The other thing you could consider is using a fixed term account that matures beyond the end of the tax year, as this could push that interest into the next tax year against a replenished personal savings allowance. Assuming you won't need that PSA to use against other savings interest in that tax year.

CliffordAlls

Are political donations to 'Reform UK' tax deductible?

Dazed_and_C0nfused

CliffordAlls said:

Are political donations to 'Reform UK' tax deductible?

They say not

https://reformuk-reformuk.nationbuilder.com/

masonic

CliffordAlls said:

Are political donations to 'Reform UK' tax deductible?

You mean Reform UK Party Limited? Neither of the two major shareholders are reportedly doing badly for themselves to be considered charity cases.