Regular savings 7% rate

MarkyMarkD

What I actually said was you can give your daughter money and then she can do what you likes with it.
I did not say that it would be taxed or it would not be taxed.
I was making the point that what you could not legally do was to put your money into an account in your daughter's name.

What you initially said was ambiguous.  What you are now saying is incorrect.  You can put your own money in your daughter's name.  That's perfectly legal.  But then the interest on that money will be taxed if it exceeds £100.  What the Inland Revenue are saying is that whether it's a gift or not, it still counts as your money.

And yes, Pam, what you are suggesting is illegal as it's tax evasion. The bank would tax it or not tax it depending whether you completed an R85. That R85 specifically mentions the limit of £100 on interest relating to funds provided by a parent. So if you sign the R85 on your child's behalf (which you would have to) that's blatant fraud.

Robert_Sterling_3

My daughter is 30 plus.
She pays tax at a lower rate than I do.
I cannot put money into an account in her name.
I can give her money which she can put in an account in her name.

deemy2004

So you can gift her the cash, she can invest it earn the interest and then gift it all back to you.

Nurse_Bambi

how come some people pay less tax on their interest than others? Is it to do with wages?

My and my fella have just started saving, after paying our debts off. All our savings are in his name and he earns double what I do. should the money be in my savings account to reduce the tax on interest?

sorry I know its a bit of a thick question, but i haven't got round to investigating 'savings' yet.

Milarky

What was originally said...

I don't want to lose any bonus or incur any costs but I would like to take advantage of the new 7% rate if possible. Any suggestions on how to make the most of my savings?

... I think as things stand there is nothing to prevent you opening a subsequent Halifax Regular Saver Account once your existing account matures...

It's been discussed elsewhere on this Board also whether closing the HFX now and getting a reduced [but still very competive rate] on the paid up amount makes sense to get access to that extra 1%

One way of looking at this: As the 'reduced' rate is less than 5% [and so more than 1% below] then the 7% rate cannot make up the 'loss' at the same rate as it is 'only' 1% higher. That's not an argument against, of course, since if you had made only a month's payment you lose almost nothing at all - it's about the 'balance' that has to be struck - the longer you have been paying in and the nearer to the end you get, the more than balance swings against 'early' account closure. The 'pivot' point is about 5 months as far as I can see..  

MarkyMarkD

My daughter is 30 plus.
She pays tax at a lower rate than I do.
I cannot put money into an account in her name.
I can give her money which she can put in an account in her name.

Relevance?

She's not a child. We were talking about children.

A parent CAN invest in their child's name and then do what the heck they like with the money - effectively use the child's name as a vehicle to avoid tax. Hence the anti-avoidance approach taken by the Inland Revenue.

If you gift money to your 30 year old daughter as suggested, she might not give it back!

MarkyMarkD

how come some people pay less tax on their interest than others? Is it to do with wages?

My and my fella have just started saving, after paying our debts off. All our savings are in his name and he earns double what I do. should the money be in my savings account to reduce the tax on interest?

sorry I know its a bit of a thick question, but i haven't got round to investigating 'savings' yet.

All that matters is the marginal tax rate you are on. If you earn £10k and he earns £20k you would both be paying a marginal tax rate of 22%** and it makes no difference whose name the savings are in.

If you earn £20k and he earns £40k he might be paying higher rate tax and the savings should be in your name, all things being equal.

But at source, savings are usually* taxed at basic rate so it makes no immediate difference; if you are liable to lower rate or no tax, you can reclaim the difference and if you are liable to higher rate tax you have to pay the difference but this is done through PAYE or self-assessment, not through the savings account tax rate.

*HOWEVER you can get your savings interest paid gross if you earn so little that you don't have to pay tax and fill in the necessary forms.

** For some obscure reason, the basic tax rate on savings is 20% not 22%. I don't know why.

deemy2004

The 1st band is 10% so the first 2000 or so of taxable pay is taxed at 10%

The 22% hence starts at around 6.8k

System

Ok now I'm really worried.
My 16 yr old has had a Nationwide Smart account for a few years with a little savings in it and the R85?? form was completed at the time it was opened. Last year my husband inherited some money and we gave her and her older sister £5000 each for their education. My eldest in using what isn't in an ISA at the moment so no real interest is accruing but the 16 year old got £114.00 gross interest in June 2004. Should we be expecting a call from the Inland Revenue, I think it's my signature on the R85 form?

MarkyMarkD

I don't know how hot the Revenue are on this one but strictly speaking your husband should be declaring the £114 on his tax return.

He also could (should) have done this more cleverly using a deed of variation on the will to get the money left directly to the children, by-passing him and avoiding the problem. This is entirely legitimate and is a good tip for anyone getting left money which they personally don't need and intend to give on to their own children or other relatives.