higher rate taxpayer - Joint Savings Account

simpleguy_blr

Hi,

If I being a higher rate taxpayer and my partner being basic tax payer were to open a joint savings account, how will this account be taxed?

Say for example I open a Icesave Online Savings Account which pays 6.1% and we both deposit money into this account from our salary, will this account be charged at the Higher Tax Rate?

Many Thanks

Aegis

50% higher rate and 50% basic rate according to my initial research.

Mikeyorks

simpleguy_blr wrote: »

Hi,

how will this account be taxed?

All at the standard 20% 'witholding' tax. If you complete an SA Return you then need to declare your 50% of the Interest .. and you'll be due an extra 20% on it. If you don't complete an SA Return .. you need to advise HMRC of your overall Interest and it's likely (if your affairs are otherwise 'simple') they will deal with it via P810. And then amend your Code number to reclaim the extra tax the following year.

To clarify

I think Aegis (who normally gets thing right) is responding on the basis of how the money will be taxed overall? I'm responding purely on the quote I've extracted - of how will the account be taxed. Both eventually distil to the same outcome.

Aegis

Mikeyorks wrote: »

All at the standard 20% 'witholding' tax. If you complete an SA Return you then need to declare your 50% of the Interest .. and you'll be due an extra 20% on it. If you don't complete an SA Return .. you need to advise HMRC of your overall Interest and it's likely (if your affairs are otherwise 'simple') they will deal with it via P810. And then amend your Code number to reclaim the extra tax the following year.

To clarify

I think Aegis (who normally gets thing right)

HA!

is responding on the basis of how the money will be taxed overall? I'm responding purely on the quote I've extracted - of how will the account be taxed. Both eventually distil to the same outcome.

Yes, mine was overall taxation levels. I later found out that apparently you can apply to have the account taxed with ratios proportional to the amount contributed by each partner. For example, it is apparently possible to have it charged at 75% basic and 25% higher if the basic taxpayer contributes 75% of the capital. However, this all sounded much more complicated than just leaving it alone, so I didn't initially return to add to my first comment, though that may have been overly simplistic!

simpleguy_blr

Thanks Aegis and Mikeyorks,
My income is purely from Salary, and I was asked to complete my SA by HMRC for the year 2005-06 and 2006-07 but I was not requested to complete one this year.

I am assuming that I am higher rate tax payer, but I am not sure.
Can one of you please let me know how can I calculate from my gross earning and find out if I will be taxed at the higher rate? My gross per anum being 39k and the only source of income.


Thanks a lot

Mikeyorks

simpleguy_blr wrote: »

My gross per anum being 39k and the only source of income.

You're borderline - the higher rate starts at £39,825 (07-08). No interest that puts it up? Pension contributions that reduce it?

http://www.hmrc.gov.uk/rates/it.htm

Being Higher Rate is no longer an automatic entry to SA. They have made attempts in recent years to weed out those with relatively straightforward affairs. But if you take your end Mar gross salary and add (your share) gross interest to it ... and fall short of £39,825 .... you shouldn't have to advise HMRC separately about your interest as the 20% deducted by your Bank at source should be all that's needed.

Mikeyorks

Aegis wrote: »

HA!

And what's with the HA! ?? It was intended to be wholly complimentary ... but I'm sure I didn't put the 'normally' in !!

simpleguy_blr

Brilliant!!!
Mikeyorks Thanks a lot mate...
I guess Cash ISA interest need not be included...

simpleguy_blr

Mikeyorks,

As per the HMRC link anything above £ 34600 is taxable at 40% if my understanding is correct this means in my case
£39000 - £5225 = £33775, hence I am still at the Basic Rate.

But If I have other income by which if this amount gets pushed to £34600 then I fall into the higher rate.

Mikeyorks

simpleguy_blr wrote: »

£ 34600 is taxable at 40% if my understanding is correct this means in my case
£39000 - £5225 = £33775,

No.

You're entitled to £5225 at effectively 'zero rate' (your personal allowance) ..... then the HR doesn't kick in until you have £34600 taxable?

So .... £5225 plus £34600 = £39825 .... before 40% kicks in.

Breathe again!;)

Mikeyorks

simpleguy_blr wrote: »

I guess Cash ISA interest need not be included...

Absolutely not .... ISAs are just ignored even for HR people. Don't give the Govt ideas.