untaxed interest on savings and investments

voddyman

Hi, I was online checking my wife's and my income tax allowances, and I noticed that in my wife's account there was a part saying "untaxed interest on savings and investments", now could someone explain what this is, please.

We only have one savings account that is in "joint names" and I was under the understanding that, as it was a joint account that we would each be allowed £1000 each before we would get taxed on any of our savings.

If that is the case, we certainly do not earn over the £2000 interest on our savings account that would be allowed before we get taxed.

Can someone please explain to me what exactly this money is that is being used by the tax office to reduce what my wife is allowed to earn before she gets taxed?

TIA 

Flugelhorn

are you sure she hasn't got another account?

eskbanker

voddyman said:

Can someone please explain to me what exactly this money is that is being used by the tax office to reduce what my wife is allowed to earn before she gets taxed?

HMRC could explain it to you.

We'd just be guessing, in the absence of full details of her income - is she a higher rate taxpayer by any chance?  When you refer to 'one savings account that is in "joint names"', do the quotation marks signify that it's not really a joint account?

Dazed_and_C0nfused

voddyman said:

Hi, I was online checking my wife's and my income tax allowances, and I noticed that in my wife's account there was a part saying "untaxed interest on savings and investments", now could someone explain what this is, please.

We only have one savings account that is in "joint names" and I was under the understanding that, as it was a joint account that we would each be allowed £1000 each before we would get taxed on any of our savings.

If that is the case, we certainly do not earn over the £2000 interest on our savings account that would be allowed before we get taxed.

Can someone please explain to me what exactly this money is that is being used by the tax office to reduce what my wife is allowed to earn before she gets taxed?

TIA 

You are probably over thinking things and don't really understand how interest is taxed.

The £1,000 you refer to is only relevant to people who have used all of their Personal Allowance (£11,310 or £12,570) and any available savings starter rate band (upto £5,000 interest taxed at 0%).

If she has unused Personal Allowance then her interest will use that, the £1,000 probably isn't of any use to her whatsoever.

If you explain what (taxable) income she has then it will be obvious of there is a problem.

voddyman

Hi, Thanks for the replies.

My wife earns £3500 per annum part-time and has £2500 as a pension per annum, and I use the married transfer of £1250 tax allowance for myself to keep my taxes down.

It's just ONE normal joint savings account, and it earns over £1000 per annum interest

On her online income tax details, it has this: Un-taxed interest on savings and investments £591?? 

And that part is what I'm confused about, as it's not on mine??

35har1old

voddyman said:

Hi, Thanks for the replies.

My wife earns £3500 per annum part-time and has £2500 as a pension per annum, and I use the married transfer of £1250 tax allowance for myself to keep my taxes down.

It's just ONE normal joint savings account, and it earns over £1000 per annum interest

On her online income tax details, it has this: Un-taxed interest on savings and investments £591?? 

And that part is what I'm confused about, as it's not on mine??

Have they altered her tax code beyond the marriage allowance transfer?

Dazed_and_C0nfused

voddyman said:

Hi, Thanks for the replies.

My wife earns £3500 per annum part-time and has £2500 as a pension per annum, and I use the married transfer of £1250 tax allowance for myself to keep my taxes down.

It's just ONE normal joint savings account, and it earns over £1000 per annum interest

On her online income tax details, it has this: Un-taxed interest on savings and investments £591?? 

And that part is what I'm confused about, as it's not on mine??

So if your wife has the following tax codes (or figures that are larger than these) she won't be paying any tax and her share of her (taxable) untaxed interest is using some of her unused allowances.

350N or 350T (part time job)
250N or 250T (pension)

As previously explained the £1,000 you are referring to is not something your wife can utilise or benefit from.

Do you have any unused Personal Allowances? 

Will you be paying basic rate tax on at least £5,000 of your taxable earnings/pension?

Do you expect to be liable to higher rate tax?

voddyman

hi, I am on a pension as well and do pay taxes on the 3 pensions I have, hence the reason I use the marriage tax allowance from my wife.

My wife has a tax code of 354T for her part-time work of £3500 per annum and a tax code of 717N for her works pension of £2500 per annum, She does NOT get any state pension till next year.

Dazed_and_C0nfused

voddyman said:

hi, I am on a pension as well and do pay taxes on the 3 pensions I have, hence the reason I use the marriage tax allowance from my wife.

My wife has a tax code of 354T for her part-time work of £3500 per annum and a tax code of 717N for her works pension of £2500 per annum, She does NOT get any state pension till next year.

So you and wife have completely different income levels.

Those tax codes mean she will not be paying any tax on either her part time work or the pension.

If there is any likelihood her part time earnings will be more than £3,549 then she should update her estimated earnings on her Personal Tax Account and an updated tax code, moving some of the allowances from her main tax code, will be issued.  For example if she thought her earnings would be £4,000 then she would end up with tax code 400T for the job and probably 671N for the pension.

Once her State Pension starts she is likely to have no spare Personal Allowance and the untaxed interest will be removed from her tax code. 
NB.  Technically the interest will then be taxed, but at a 0% tax rate.

In your case I would say there is no interest deduction in your tax code as you have no spare allowances and your interest is already due to be taxed at 0%.

voddyman

Dazed_and_C0nfused said:

voddyman said:

hi, I am on a pension as well and do pay taxes on the 3 pensions I have, hence the reason I use the marriage tax allowance from my wife.

My wife has a tax code of 354T for her part-time work of £3500 per annum and a tax code of 717N for her works pension of £2500 per annum, She does NOT get any state pension till next year.

So you and wife have completely different income levels.

Those tax codes mean she will not be paying any tax on either her part time work or the pension.

If there is any likelihood her part time earnings will be more than £3,549 then she should update her estimated earnings on her Personal Tax Account and an updated tax code, moving some of the allowances from her main tax code, will be issued.  For example if she thought her earnings would be £4,000 then she would end up with tax code 400T for the job and probably 671N for the pension.

Once her State Pension starts she is likely to have no spare Personal Allowance and the untaxed interest will be removed from her tax code. 
NB.  Technically the interest will then be taxed, but at a 0% tax rate.

In your case I would say there is no interest deduction in your tax code as you have no spare allowances and your interest is already due to be taxed at 0%.

Thank you for explaining that so succinctly, I now understand why she has untaxed on savings and interest on her tax statement, I just couldn't get my head round that and why they put that figure of £591  untaxed on savings on interest on her income tax details. And yet there was no mention of it on my tax statement
Thank you