Joint accounts and tax
Joint accounts and tax
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Discussion

RizzoTheRat

Original Poster:

29,043 posts

222 months

Wednesday 26th February 2014
quotequote all
I'm a higher rate tax payer and self assess, while my wife's currently paying basic rate via PAYE only. If we open a joint account do I declare half the interest on my self assessment or how does it work?

The account would mainly be for me to put money in and her to spend if/when we have kids, so it wouldn't be me benefiting from the interest in which case presumably her having a personal account and a shared credit card might be a better idea?

Eric Mc

125,784 posts

295 months

Wednesday 26th February 2014
quotequote all
Simple answer is "yes".

As it is a joint account, any interest received on the account is split between you and the other account holder.

If the other account holder is a basic rate taxpayer - then they have no more tax to pay as the 20% tax deducted at source by the bank will clear her tax liability on that interest.

As you are a higher rate taxpayer, you will be required to show 50% of the interest on your self assessment tax return. You are liable to pay 40% tax on this interest. You will receive a credit for the 20% already deducted at source by the bank and the remaining 20% due will be part of your overall self assessment tax bill for the year.

RizzoTheRat

Original Poster:

29,043 posts

222 months

Wednesday 26th February 2014
quotequote all
Thanks Eric, individual accounts it is then.

The Leaper

5,721 posts

236 months

Wednesday 26th February 2014
quotequote all
A simple confirmation that Eric is right, as always! My wife and I have a joint account and we've been doing self assessment for 20+ years. The interest is split 50/50 and she gets a tax rebate as her overall income is below her personal allowance, and I pay 40% as mine is considerably more.

R.

sumo69

2,164 posts

250 months

Wednesday 26th February 2014
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The Leaper said:
A simple confirmation that Eric is right, as always! My wife and I have a joint account and we've been doing self assessment for 20+ years. The interest is split 50/50 and she gets a tax rebate as her overall income is below her personal allowance, and I pay 40% as mine is considerably more.

R.
Why doesn't she register to receive her interest gross? This can be done on a joint account with the effect that the tax deduction is halved but is wholly attributable to your half of the income.

David

Sir Bagalot

7,107 posts

211 months

Wednesday 26th February 2014
quotequote all
sumo69 said:
The Leaper said:
A simple confirmation that Eric is right, as always! My wife and I have a joint account and we've been doing self assessment for 20+ years. The interest is split 50/50 and she gets a tax rebate as her overall income is below her personal allowance, and I pay 40% as mine is considerably more.

R.
Why doesn't she register to receive her interest gross? This can be done on a joint account with the effect that the tax deduction is halved but is wholly attributable to your half of the income.

David
Or even better why have a joint account!

Lady B pays a lower rate of tax than me, that's why pretty much everything is in her name.

The Leaper

5,721 posts

236 months

Thursday 27th February 2014
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Just about everything is in Mrs. L's name, this is one asset that is not. We are content with this arrangement and the tax situation for both of us.

R.

Eric Mc

125,784 posts

295 months

Thursday 27th February 2014
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There are other factors ion life outside of tax. Obviously, people should, wherever possible, optimise their tax position. But, on occasions, other matters may assume more importance - such as access to funds - or relationship issues.

Don't let the tax tail wave the life dog.