Are ISAs better for low or higher rate taxpayers?

overload99

We are a married couple with approx. £30k we want to put into ISAs until we're ready to do home renovations. I work part-time and earn below the tax threshold so I'm a non-taxpayer. My spouse is a higher rate tax payer. Should we put the majority of the money into an ISA in my name or my spouse's name? Or should we just split it 50/50? Thanks for any advice. 

jimjames

What other savings do you have? Normally it would be better to put in the higher rate taxpayer ISA as they have only £500 interest allowance each year. 

overload99

Thanks. No other savings.

masonic

You should use the combination that achieves the best net rate of interest. At the moment, if you wanted access to the money, there would be no reason not to put all £30k in ISAs split between you and the split would not matter as neither of you would pay any tax on the interest.

peter021072

Presumably you mean cash ISA?  It usually benefits higher taxpayers most, since with normal savings

Basic-rate (20%) taxpayers: can earn £1,000 in savings interest per year with no tax

Higher-rate (40%) taxpayers: can earn £500 in savings interest per year with no tax

Additional-rate (45%) taxpayers: £0 – they do not get an allowance.


However, you may not need an ISA. If you're a non-taxpayer – that is you have less than £12,570 income per year, you may be able to earn as much as £18,570 in savings interest tax-free. But it depends on how much income you do have, whether from a pension, or from working. See

https://www.moneysavingexpert.com/savings/personal-savings-allowance/

DRS1

I suppose the other question is have either of you used up some or all of your ISA allowance for this tax year.

friolento

Assuming you'd want access to your money in the next 12 months, you want to put it into a easy access accounts. Right now, the best interest rate in easy access accounts is in the Trading 212 cash ISA - 5.1%. So whilst you do not need a cash ISA to escape tax, the best solution is an ISA for each of you. How you distribute your £30k is down to you - e.g. £10k in one, £20k in the other, or £15k in each, £20k now into an ISA in your spouse's name, and another £10k into the same ISA on April 6, etc etc

Keep an eye on rate developments, and move your cash as and if needed. You can always find up-to-date rates on Moneyfactscompare

There are some accounts which beat the 5.1% rate (for yourself, not likely for your spouse) but these require longer term commitments and most of them have very low monthly deposit limits.

born_again

overload99 said:

We are a married couple with approx. £30k we want to put into ISAs until we're ready to do home renovations. I work part-time and earn below the tax threshold so I'm a non-taxpayer. My spouse is a higher rate tax payer. Should we put the majority of the money into an ISA in my name or my spouse's name? Or should we just split it 50/50? Thanks for any advice. 

How soon are you planning on doing the renovations?

SacredStephan

overload99 said:

We are a married couple with approx. £30k we want to put into ISAs...

Is the money currently in a savings account that pays interest?

overload99

born_again said:

overload99 said:

We are a married couple with approx. £30k we want to put into ISAs until we're ready to do home renovations. I work part-time and earn below the tax threshold so I'm a non-taxpayer. My spouse is a higher rate tax payer. Should we put the majority of the money into an ISA in my name or my spouse's name? Or should we just split it 50/50? Thanks for any advice. 

How soon are you planning on doing the renovations?

Hopefully within the next 12 months.

overload99

SacredStephan said:

overload99 said:

We are a married couple with approx. £30k we want to put into ISAs...

Is the money currently in a savings account that pays interest?

Yes but rubbish interest rate.