Save in Wife's Name?

Valley_Bluenose

My earnings currently take me close to the higher rate tax band - indeed with interest from savings I will go over the threshold. I have utilised my ISA to reduce tax liability but will still go over the threshold.

My wife, sadly, cannot work. She has been in receipt of Incapacity Benefit, formerly Invalidity Benefit, since before Apr 95 (I believe this date is crucial because those on Invalidity Benefit before that date have their benefit classed as 'non-taxable'). My wife also utilises her ISA allowance and the interest on her other savings is paid 'gross' because she does not go over the threshold into tax liability.

Should we put all our savings in her name and pay interest at the basic rate rather than have me paying tax at the higher rate (notwithstanding the new 10% thing on interest?) or should we continue to split our savings. I trust her implicitly by the way!:A

Any advice gratefully received.

Admin: feel free to move this to the Savings Board or the Benefits Board if you deem it appropriate.

standupguy

Yes Yes Yes everytime!
The 10% on interest does not come into effect in your case due to your earnings.

Your wife can earn £6035 in gross interest this tax year so it is best to stash the cash in her accounts.

Make sure you monitor the interest payments each month from 6/4/08 to 5/4/09 to make sure she keeps within her allowances.

Mikeyorks

As above - wef from Sept 2008 (when the Chancellor's extra £600 bites) her tax free personal allowance will be £6035. But on top of that the next £2320, if Savings interest only, attracts only 10%.

But the 10% band is only available if your Savings income (critically - this is the top slice of your income) hits the band formed by (personal allowance + £2320). So it doesn't (from this and an earlier thread) apply to you.

Valley_Bluenose

Thanks Mike, think I've got it now.