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Sharing tax allowance with spouse

DLPMaybe

Established Member
There is an article in today's mirror regarding ways to save paying tax:

http://www.mirror.co.uk/news/tm_obj...e=10-ways-to-cut-your-tax-bill-name_page.html

The point that intestest me is:

5 PERSONAL TAX ALLOWANCE

A HIGHER rate taxpayer can save tax by transferring money into a lower earning - or nonearning - spouse's name.

Almost £230million is lost every year in this way as the tax liability on the switched savings would be lower or non-existent.

Also check your tax code, to make sure you're not paying over the odds.

Is this possible if you get paid through PAYE? I thought you could only do this if you set up your own company and paid yourself through this.
 

DJT75

Distinguished Member
I believe this refers to your net savings rather than your actual income, someone was explaining this to me in the pub the other week. If you earn £40,000 a year (take home about £27,500) & put away £500 a month in a normal savings account, your interest on that account will be taxed at the normal standard rate. Because you're a high rate tax payer you should in theory declare your interest to the Inland Revenue so they can collect the additional tax on your interest to take you up the the higher rate.

Alternatively save all money in your partners name (if they're a lower earner) & only pay tax at their standard rate on earned interest...
 

DLPMaybe

Established Member
DJT75 said:
I believe this refers to your net savings rather than your actual income, someone was explaining this to me in the pub the other week. If you earn £40,000 a year (take home about £27,500) & put away £500 a month in a normal savings account, your interest on that account will be taxed at the normal standard rate. Because you're a high rate tax payer you should in theory declare your interest to the Inland Revenue so they can collect the additional tax on your interest to take you up the the higher rate.

Alternatively save all money in your partners name (if they're a lower earner) & only pay tax at their standard rate on earned interest...

That makes sense. I re-read the quote and it does indeed talk about savings. Shame.
 

booyaka

Moderator
As above - perfectly put. I recommend numerous clients do this as there are lots of people who have joint accounts and husband is 40% tax payer and wife is 0% or 10% tax payer and they pay 40% tax on savings accounts - madness!!

Transfer it to wifes name and pay nil or lower rate savings tax!! easy! (mind you the capital is then owned wife!!!:eek: )
 

Bat-man

Prominent Member
Transfer it to wifes name and pay nil or lower rate savings tax!! easy!
Erm - Hope you don't mind me pointing this out but the wife's income just could be higher than the husband's! :)

Presumably this also applies to Civil Partnerships.
 

Mr Cat

Banned
DJT75 said:
Alternatively save all money in your partners name (if they're a lower earner) & only pay tax at their standard rate on earned interest...

but then you risk losing it all on hand bags and shoes... :eek:
 

booyaka

Moderator
Bat-man said:
Erm - Hope you don't mind me pointing this out but the wife's income just could be higher than the husband's! :)

Presumably this also applies to Civil Partnerships.

Indeed - i was using the fairly common example where the wife is housewife/part time worker etc and thus has little/less or no income etc.

With regards civil partnerships, it's the same sort of rule applies, if you treat the partners as individuals and put the money in the name of the lowest earning/tax paying individual then the savings will only be tax at the individuals lowest rate of tax, rather than joint names and thus the individual with the highest rate of tax is taken for tax purposes.
 

DJT75

Distinguished Member
Mr Cat said:
but then you risk losing it all on hand bags and shoes... :eek:

Nah, just don't tell her you've opened up the account in the first place, she'll sign anything you put in front of her. That or simply destroy anything that resembles an envelope that could contain an ACCOUNT NUMBER!!:eek:
 

booyaka

Moderator
Mr Cat said:
but then you risk losing it all on hand bags and shoes... :eek:

oh so true - that is usually the reason that they continue to pay higher rate tax on the savings as the husband suggest that it is most cost effective in the long term, than giving the money to the wife!!!!:D :D
 

DJT75

Distinguished Member
booyaka said:
Indeed - i was using the fairly common example where the wife is housewife/part time worker etc and thus has little/less or no income etc.

With regards civil partnerships, it's the same sort of rule applies, if you treat the partners as individuals and put the money in the name of the lowest earning/tax paying individual then the savings will only be tax at the individuals lowest rate of tax, rather than joint names and thus the individual with the highest rate of tax is taken for tax purposes.

I assume this can be done with kids too? Stick everything in your childs name & you're sorted - unless they develop an online gambling addition &/or smack habit of course.......
 

Toasty

Distinguished Member
A quick additional, remember ISA's allow upto 3grand cash savings and upto 7grand stocks and shares each year Tax free per person. So you'll find higher rate tax payers setting up their own and their partners with ISA accounts. Therefore theoretically upto 14grand a year per couple tax free regardless of your tax code.
 

colinwheeler

Established Member
Yeah, my wife earns more than me but we have found a better way for us. Just transfer all the money offshore if you have anything that you want to spend money on out of the coutry (think holiday expenses, that house in the med that you have always wanted, etc) and then you don't pay taxes on the interest at all.
 

Toasty

Distinguished Member
DJT75 said:
I assume this can be done with kids too? Stick everything in your childs name & you're sorted - unless they develop an online gambling addition &/or smack habit of course.......

I wouldn't recommend this, Children have a lot of power over their savings / accounts and you'd find this difficult to manage especially as they get older.

I could not believe it when I was told our kids will be asked to provide a signature for their accounts when they reach 7!!! And theres another threshold of 12 when they can start getting cash cards etc
 

booyaka

Moderator
DJT75 said:
I assume this can be done with kids too? Stick everything in your childs name & you're sorted - unless they develop an online gambling addition &/or smack habit of course.......

In simple term - NO, this can not be done.

Giving money to your children or investing on their behalf

You can give a child or invest on their behalf as much money as you like. But if you’re a parent or step-parent and the money you give your child earns more than £100 interest a year, this interest will be taxed as if it were your own.

The £100 limit only applies to parents and step-parents. Grandparents and other adults who give money to children are not liable to pay the tax if the interest exceeds £100 a year.

try here:
http://www.direct.gov.uk/MoneyTaxAn...Articles/fs/en?CONTENT_ID=10013916&chk=FGCHVY
 

booyaka

Moderator
colinwheeler said:
Yeah, my wife earns more than me but we have found a better way for us. Just transfer all the money offshore if you have anything that you want to spend money on out of the coutry (think holiday expenses, that house in the med that you have always wanted, etc) and then you don't pay taxes on the interest at all.

Be very careful about this as the new EU savings directive (in force Jan 2006) has wide reaching powers that can force the Bank/financial institutions to either tax you on your offshore savings, and or hand over the names of the individuals to the HMRC to tax them directly. I think it can be done retrospectively also (10/15 years, can't remember exactly)
 

colinwheeler

Established Member
How can they tax you on offshore earnings?

Sorry rephrase that. I believe they should not tax you on offshore earnings. By offshore, I mean offshore, not just EU somewhere. But really, if I earn interest on an investment that is offshore, then the UK should have no right to tax them?

The tax law in this coutry is one of the worst in the world. In other countries where I have lived there would have been a general uprising if the government decided to change tax laws, the retroactivley apply those laws to people to collect back taxes on something that was legal when it was done.
 

booyaka

Moderator
Eu savings directive is aimed at offshore savings (cash accounts etc) - rather than actual offshore investments (bonds, OEIC, SICAV's etc)

Goverment do it all the time - have a look for Pre-Owned Asset Tax (POAT) this is a retrospective tax on various types of trust arrangements that people set up to do something about there IHT liability and now the goverment are saying that they can tax people of the underlying benefit of the trust arrangement. (a bit of topic i know but hey ho!!)
 

colinwheeler

Established Member
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Thieves! I bloody pay enough taxes already!
 

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