R85 Untaxed Interest

krystufer

This has probably been asked, but I couldnt find it in the search.

My wife doesnt work anymore, she now looks after the baby full time. I have a not insignificant amount of savings which are currently in my Wife and My names.

I would like to maximise the amount of untaxed interest I earn on this money especially as we have lost an income. My wife tells me she can submit an R85 and get tax free savings. The trouble is the savings are in both our names. How does this work? Can she still claim? Would it be on half the savings as it is a joint account? Can I "give" my half to my wife? If I did sign it all over to my wifes name, will she run off with the Milkman? Who knows

Cheers,

Krystufer

Bennifred

Hi krystufer! Yes, your wife can submit an R85 against any interest-bearing account with her name (or both of you) on it. If the account is in her name only she gets paid the interest tax-free. If it a joint account, then half of the interest will be tax-free, with tax paid on the other half of the interest.
When I gave up work to be a full-time mother, we put all the savings accounts in my name for this very reason. Better in your pocket than their's! HTH.

Just thought - of course this only applies if the interest doesn't exceed her personal tax allowance :eek:

isasmurf

From http://www.hmrc.gov.uk/taxback/jointaccs.htm

However, if one of you doesn't have to pay tax but the other does, then it depends on whether your bank, building society or local authority will allow part of the interest to be paid with no tax taken off and part with tax taken off. If they don’t, you can still claim tax back from us in the usual way.

Robert_Sterling_3

Put all the money in your wifes name to maximise your family income.

tykeintsouth

If I earn the money and then put it in a savings account in my wife's name (she has no income), why does that not then become her income which she can then become taxed on? I appreciate that I've already paid tax on it and so it would effectively be being taxed twice, but when did that ever stop the tax office? (e.g. inheritance tax!)

windym_2

What you must also not forget - if you have 'not insignificant savings' then it will not be too long before she is earning interest which must be taxed. Interest is taxed at a flat rate whereas income tax is charged at several, the lowest (apart from your free tax allowance) is 10%. Therefore you could be paying too much tax on your interest.

If you go to the following page it will explain about it. You can claim back the overpaid tax every year.


http://www.hmrc.gov.uk/taxback/

HTH.

lisyloo

why does that not then become her income

It is classed as a gift and not income.
Gifts between spouses are tax free and are not subject to inheritance tax (potentially).

There are tax complication if you give gifts to someone you are not married to, but between spouses it's fine.

Nick_C_4

My wife and I do exactly this too - all our savings are in her name, tax-free. She even filled an R85 in for our current account, it doesn't make much difference, but you only have to do it once and it's only a few minutes' work. I know all the on-line banking access codes so I can shuffle the money around when necessary. Yep, your wife could run off with all the money, but if the savings are currently in joint accounts then she could do that already...