Higher rate taxpayer husband putting savings into wifes account

UnsureAboutthis

Hello. As Above. Some of the family are in that situation, IE, our son's work and are higher rate taxpayers and their wives have not worked for years. 

One pays 45% paye and other pays 45% paye and I think savings at higher rates over 500 pounds attracts 40% tax.

El_Torro

OK, so what's your question? If you're asking if this is a legal way to avoid paying tax on interest then the answer is Yes. 

UnsureAboutthis

Thank you @El_Torro

One of the children has sold an investment and has just over a 100k after tax. He's had the investment b4 getting married. So its ok just to tranfer it to the wifes account and pay the 20% for more than 1k interest?

dunstonh

One of the children has sold an investment and has just over a 100k after tax. He's had the investment b4 getting married. 

Did he not consider transferring some of that to the spouse before selling the investment?  It may have reduced the tax liability.

So its ok just to tranfer it to the wifes account and pay the 20% for more than 1k interest?

yes.   And the wife will also be able to earn more than £1k interest without paying tax.

Emmia

But of course once transferred it's the wife's money...

jimjames

UnsureAboutthis said:

Hello. As Above. Some of the family are in that situation, IE, our son's work and are higher rate taxpayers and their wives have not worked for years. 

One pays 45% paye and other pays 45% paye and I think savings at higher rates over 500 pounds attracts 40% tax.

For those rates pension may be worthwhile to look at too as well as ISAs for them both

Kim_13

All non-ISA interest earned by a 45% rate payer is taxable at 45%. Basic rate taxpayers have a £1,000 PSA, higher rate taxpayers £500 PSA but additional rate taxpayers don’t get one at all.

UnsureAboutthis

jimjames said:

UnsureAboutthis said:

Hello. As Above. Some of the family are in that situation, IE, our son's work and are higher rate taxpayers and their wives have not worked for years. 

One pays 45% paye and other pays 45% paye and I think savings at higher rates over 500 pounds attracts 40% tax.

For those rates pension may be worthwhile to look at too as well as ISAs for them both

pensions maxed out as well as isa's - 

saajan_12

Son can't get anything back on the gains already realised on the investment, to get the 100k.

However the FUTURE interest on the 100k can attract less tax if he gifts it to wife and then she earns the interest, with a 1k allowance (or more if she earns 0 and has her 12k allowance + 5k savings starter rate). 

If they've been married long enough with a family etc then the assets will be deemed 50/50 anyway so it doesn't matter that its gifted (though practicallly it might be in the wife's control before that point!) 

UnsureAboutthis

saajan_12 said:

Son can't get anything back on the gains already realised on the investment, to get the 100k.

However the FUTURE interest on the 100k can attract less tax if he gifts it to wife and then she earns the interest, with a 1k allowance (or more if she earns 0 and has her 12k allowance + 5k savings starter rate). 

If they've been married long enough with a family etc then the assets will be deemed 50/50 anyway so it doesn't matter that its gifted (though practicallly it might be in the wife's control before that point!) 

Thanks. Yes, they've been married for almost 10 years.  For that reason no need to gift as it would be hers anyway.
Both of  young ladies married to our son's have not worked since having their first child.  

I'll also suggest an isa for her.

molerat

UnsureAboutthis said:

saajan_12 said:

S.............

Thanks. Yes, they've been married for almost 10 years.  For that reason no need to gift as it would be hers anyway.
Both of  young ladies married to our son's have not worked since having their first child.  

I'll also suggest an isa for her.

Which brings up another point, are they both getting child benefit or £0 child benefit claim to get the NI credits ?