Wife starting new job!!

andymkay

Help, I need advice.
My wife is about to start part time work and will earn approx £250 a month. She has been off work since 2001 since the birth of the kids but now is a good time to start again.
We have savings of 8,000 each in an ISA and 21,000 in a bank account where we save £300 a month. What do we do? Is it a good idea to do nothing as the interest on the 21K and her wage will or will not take her over the 5k threshold per year where you pay tax? Or transfer this years ISA allowance each from the 21K to our ISA's (we have put nothing in it this financial year so far).We do not own our own home as I move about a ot and work pays 75% of the rent.
Do we transfer the 300 a month to our ISA's? Any helpful advice is grateful.
What do you experts advise?
Thanks

Browntoa

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whatatwit

Personally, I would put £3000 for each of you into an ISA, and then do the same on 6th April. This way the interest remains tax free no matter how your wife's wages increase. (as long as it stays in an ISA)
Is the bank account in your wife's name only, and as such registered to be paid gross, or does she just claim back the tax each year on her half share?

TaxGeek

You should probably each put this year's allowance into ISAs. If you don't use the allowance by 5 Apr you lose it. If you do this you'll benefit immediately, and your wife would if her tax situation changes (ie earns enough to become taxpaying) If you might need the money, put the money in an instant access mini cash ISA so it'll effectively be no different to having it in savings, except you'll save tax. Post 6 Apr you should then consider investing next year's allowance in full asap...why pay tax on interest when you don't need to? The level of risk you want to take will affect whether you invest in an ISA or mini-cash ISA.

(Please note I'm not a Financial Adviser)

andymkay

To the reply from whatatwit

Is the bank account in your wife's name only, and as such registered to be paid gross, or does she just claim back the tax each year on her half share?

At the moment the 21K is in her name only and doesn't pay tax however I feel combined with 3000 wages a year and the interest on this at5.8% each year may tip her over to start paying tax? Will she pay tax on the extra (over and above the annual allowance or on all the interest on 21K?) Although unanimously all think it (allowed amount) should go into as ISA. Is it £4000 for financial year 07-08?
Looking forward to the reply
Cheers

TaxGeek

That won't be enough on it's own to mean your wife needs to pay any income tax, but I personally would still use both your ISA allowances for 07/08 now, and then 08/09 in April.

If it were enough to pay tax, tax is only payable on total income above her tax fee allowance (not all the interest)

The allowance for a mini-cash ISA in 07/08 is £3k, or £7k for a shares ISA.

whatatwit

andymkay wrote: »

To the reply from whatatwit

Is the bank account in your wife's name only, and as such registered to be paid gross, or does she just claim back the tax each year on her half share?

At the moment the 21K is in her name only and doesn't pay tax however I feel combined with 3000 wages a year and the interest on this at5.8% each year may tip her over to start paying tax? Will she pay tax on the extra (over and above the annual allowance or on all the interest on 21K?) Although unanimously all think it (allowed amount) should go into as ISA. Is it £4000 for financial year 07-08?
Looking forward to the reply
Cheers

If there is a chance that her total income might go over the tax allowance, then you should de-register the account and have it paid net. A repayment claim can always be made after 5th April 2009.

Mikeyorks

andymkay wrote: »

At the moment the 21K is in her name only and doesn't pay tax however I feel combined with 3000 wages a year and the interest on this at5.8% each year may tip her over to start paying tax?

No. Her personal allowance from 6th April is £5435. The interest from the £21k is circa £1,218 (gross) + £3,000 wages = £4,218. So, she is comfortably below the tax threshold (as long as there aren't any taxable allowances you haven't mentioned).

But ... the £300pm savings might be better directed towards your ISA (the allowance for a cash ISA increases to £3,600 each from 6th April). Otherwise the monthly £300 into the savings account plus the accruing interest on it ... will push her over the limit, in a few more years.