Savings tax and shared accounts

Bexm

Hi

I'm getting rather confused with tax and savings and not sure if I need to make some changes.

I have my own savings accounts, maybe £3000 in them together.

Then I have a joint savings account with my mum. It's not my money, I'm just named on the account so I can easily access it for emergencies with my parents. They go on holiday a lot and I think they're thinking about me getting out to them if something happens...

This account has about 30 grand in it at the moment.

Now I don't know how this affects my tax on my savings but I'm sure it is somewhat tho.

Is there a better way of having access to an emergency fund? Or suggestions of where I should get my mum to put some of her money?

I've never had enough savings to worry about tax before.. but suddenly twigged that she does!!

Thanks for any input on what some of you will probably think is a silly question.

slinger2

There's no tax on savings. There could be tax to be paid on the interest you get from savings accounts. Basic rate taxpayers don't pay tax on the first £1,000 of interest but after that you'll effectively pay 20% tax.

Bexm

slinger2 said:

There's no tax on savings. There could be tax to be paid on the interest you get from savings accounts. Basic rate taxpayers don't pay tax on the first £1,000 of interest but after that you'll effectively pay 20% tax.

Told you I was confused!! So it's only on interest..and to get £1000 interest we'd need a heck of a lot more than that!
So do we need to do anything?

ColdIron

If you'd need "a heck of a lot more than" £30,000 to get £1,000 interest I'd look at the rate you are getting now. Not hard to get £1,425 on that amount

BTW you would only be liable for half the interest on a joint account, it will be shared between you and your parents

Nasqueron

Bexm said:

slinger2 said:

There's no tax on savings. There could be tax to be paid on the interest you get from savings accounts. Basic rate taxpayers don't pay tax on the first £1,000 of interest but after that you'll effectively pay 20% tax.

Told you I was confused!! So it's only on interest..and to get £1000 interest we'd need a heck of a lot more than that!
So do we need to do anything?

I have £5000 in the NatWest Digital Regular saver which is 6.17%, I will be getting around £25 a month in interest so around £300 a year. Wouldn't take much for £30,000 in any half decent account to get that sort of money - 3.4% interest would get you over the £1000 limit annually and that assumes no other interest and you stated you have £3,000 in other savers.

Albermarle

I've never had enough savings to worry about tax before.. but suddenly twigged that she does!!

Often people keep some/all of their savings in a Cash ISA , as this protects the interest from tax. You can add up to £20K per tax year, but joint Cash ISAs are not allowed.

Otherwise ( outside the shelter of an ISA) how much you can earn in interest before paying tax depends on your income. Very low/non earners can earn a lot of interest without paying tax.
Maybe have a look through this. 
Savings | MoneySavingExpert

Yorkie1

OP, it would be worth you checking the following:

1. What interest did you receive in the tax year 2024-25 on your own account? (the one with about £3K in it)
2. What interest did the joint account with your mum receive in the tax year 2024-25?
3. What overall taxable income you had in tax year 2024-25 (e.g. earnings), excluding the interest on savings (from your P60)

You'll then be able to add 1, plus half of 2, and all of 3 together to get your overall taxable income, which influences how savings interest is taxed (among other things).

As a very basic overview:

If the overall total is up to £50270 then you're a basic rate tax payer and:
- if 1 plus 50% of 2 is less than £1000 then you won't pay any tax on that interest
- if 1 plus 50% of 2 is more than £1000 then you will pay tax on the excess (basic rate)

If the overall total is more than £50270 up to £150K then you're a higher rate tax payer and:
- if 1 plus 50% of 2 is less than £500 then you won't pay any tax on that interest
- if 1 plus 50% of 2 is more than £500 then you will pay tax on the excess (basic rate)

It is more complicated than that, but it gives an idea of the basics. See also this gov uk page: Tax on savings interest: How much tax you pay - GOV.UK

Two things to consider about the joint account with your mum:
a) if you are ever in the position of needing to claim means-tested benefits, 50% of that account will be treated as yours. I am not sure, but it may also be treated as yours if you are married and divorce, or if you are assessed for bankruptcy 
b) if your mum passes away, I'm not sure whether your dad would have access to it (because it's jointly held with you, and not with him).
(happy to be corrected by others on either point)

Bexm

Does all this tax get worked out automatically ?
As in do the banks and what ever know and I'll just get taxed if I go over X interest amount across all accounts/job etc?

InvesterJones

Bexm said:

Does all this tax get worked out automatically ?
As in do the banks and what ever know and I'll just get taxed if I go over X interest amount across all accounts/job etc?

Yes, with some caveats for very high amounts (>£10,000 interest). Banks will report it to HMRC and they'll adjust your tax code accordingly in subsequent years.

Middle_of_the_Road

Bexm said:

Does all this tax get worked out automatically ?
As in do the banks and what ever know and I'll just get taxed if I go over X interest amount across all accounts/job etc?

Yes, all banks report interest to HMRC, and your tax code will be adjusted to collect any tax due.