Reducing tax liability
Discussion
Hi all,
I have just filled in my tax return and due to interest on savings and dividends, as a higher rate tax payer, I have to cough up a reasonable sum to HMRC.
I am wondering that if I transfer or gift, the majority of my savings to my fiancée, she as a basic rate tax payer, won,t be liable for further tax on the money, other than the 20% that is taken from the interest via the bank?
The interest earned when added to her salary, won,t take her into the higher tax rate but will she then have to fill in a tax return each year?
I realise that we will have to sort out our wills and there is the chance she may run off into the sunset with it, but from a legal point, is it acceptable?
I have just filled in my tax return and due to interest on savings and dividends, as a higher rate tax payer, I have to cough up a reasonable sum to HMRC.
I am wondering that if I transfer or gift, the majority of my savings to my fiancée, she as a basic rate tax payer, won,t be liable for further tax on the money, other than the 20% that is taken from the interest via the bank?
The interest earned when added to her salary, won,t take her into the higher tax rate but will she then have to fill in a tax return each year?
I realise that we will have to sort out our wills and there is the chance she may run off into the sunset with it, but from a legal point, is it acceptable?
You can give away what you like to whoever you like. But once you have given it away - it isn't actually yours any more. Do you REALLY want to give away your assets in order to save what is probably not a massive amount of tax?
What happens if you split up with your girlfriend? Are you going to demand that she gives back to you the assets you gave to her as gifts?
If you give stuff away with the priviso that you can reclaim it at a later date, then it isn't a proper "gift" in law. It is referred to as a gift "with reservation of title". Any tax advantages sought under such an arrangement will be looked on as a form of "tax evasion" - which is fraud.
What happens if you split up with your girlfriend? Are you going to demand that she gives back to you the assets you gave to her as gifts?
If you give stuff away with the priviso that you can reclaim it at a later date, then it isn't a proper "gift" in law. It is referred to as a gift "with reservation of title". Any tax advantages sought under such an arrangement will be looked on as a form of "tax evasion" - which is fraud.
This is the reason why all our savings/shares/BTL's are in Lady B's name.
Eric Mc said:
You can give away what you like to whoever you like. But once you have given it away - it isn't actually yours any more. Do you REALLY want to give away your assets in order to save what is probably not a massive amount of tax?
What happens if you split up with your girlfriend? Are you going to demand that she gives back to you the assets you gave to her as gifts?
If you give stuff away with the priviso that you can reclaim it at a later date, then it isn't a proper "gift" in law. It is referred to as a gift "with reservation of title". Any tax advantages sought under such an arrangement will be looked on as a form of "tax evasion" - which is fraud.
Mind you it does help that she doesn't know the passwords to access her online accounts, or where the sharecerts are heldWhat happens if you split up with your girlfriend? Are you going to demand that she gives back to you the assets you gave to her as gifts?
If you give stuff away with the priviso that you can reclaim it at a later date, then it isn't a proper "gift" in law. It is referred to as a gift "with reservation of title". Any tax advantages sought under such an arrangement will be looked on as a form of "tax evasion" - which is fraud.
Eric Mc said:
You can give away what you like to whoever you like. But once you have given it away - it isn't actually yours any more. Do you REALLY want to give away your assets in order to save what is probably not a massive amount of tax?
What happens if you split up with your girlfriend? Are you going to demand that she gives back to you the assets you gave to her as gifts?
If you give stuff away with the priviso that you can reclaim it at a later date, then it isn't a proper "gift" in law. It is referred to as a gift "with reservation of title". Any tax advantages sought under such an arrangement will be looked on as a form of "tax evasion" - which is fraud.
Indeed you can...my reading of Op's post was that he was alluding to potentially special tax arrangements with his partner which I believe are only bestowed upon a spouse. He can if he wishes give his savings to the postman.What happens if you split up with your girlfriend? Are you going to demand that she gives back to you the assets you gave to her as gifts?
If you give stuff away with the priviso that you can reclaim it at a later date, then it isn't a proper "gift" in law. It is referred to as a gift "with reservation of title". Any tax advantages sought under such an arrangement will be looked on as a form of "tax evasion" - which is fraud.
Gifts with reservation are worth noting, though the small sums involved may come under his annual allowance. Some people think they can give their house to their kids whilst still living in it and retaining 'comfort and pleasure' from the asset (a bit like looking at a valuable painting). The taxman tends to simply add these back into an estate at the appropriate time.
I'm with Eric AND Sir Bagalot on this one, though I maintain that it may be too late for this tax return. If your partner isn't that interested in finances then start opening up accounts in her name
Thanks for all of the replies thus far.
I know it's too late for this financial year but i'm thinking of what i can do going forward. It is not a huge sum, but i was thinking for the simple process of transferring funds, if it's all above board, then why not. Rather in our pot than the governments.
I know should we split that there may be issues but the odds of this happening are so remote they aren't an issue for me.
It is correct that i haven't maxed out my isa so i will start doing this for her and me.
Surely if i gift her the money and i continue saving a modest amount for myself, there is nothing anyone can do?
So, in a nutshell, would she be liable for additional tax on the savings above the amount taken from the interest as she is a lower rate tax payer?
I know it's too late for this financial year but i'm thinking of what i can do going forward. It is not a huge sum, but i was thinking for the simple process of transferring funds, if it's all above board, then why not. Rather in our pot than the governments.
I know should we split that there may be issues but the odds of this happening are so remote they aren't an issue for me.
It is correct that i haven't maxed out my isa so i will start doing this for her and me.
Surely if i gift her the money and i continue saving a modest amount for myself, there is nothing anyone can do?
So, in a nutshell, would she be liable for additional tax on the savings above the amount taken from the interest as she is a lower rate tax payer?
M001 said:
So, in a nutshell, would she be liable for additional tax on the savings above the amount taken from the interest as she is a lower rate tax payer?
No.Any savings accounts in her name that have had the correct amount of tax deducted at source have no further liability as a basic rate tax payer
No so long as her total income for the tax year does not exceed the basic rate threshold of £42475 for 2012/13.
The original gifts dependent on amount may be deemed Potentially Exempt Transfers for Inheritance Tax purposes - without knowing amounts its difficult to say.
Any gift of shares to her would be a disposal for Capital Gains Tax - so long as any profits do not exceed the current allowance of £10600 then not a problem.
The CGT and IHT issues are somewhat simpler if she was your wife!
David
The original gifts dependent on amount may be deemed Potentially Exempt Transfers for Inheritance Tax purposes - without knowing amounts its difficult to say.
Any gift of shares to her would be a disposal for Capital Gains Tax - so long as any profits do not exceed the current allowance of £10600 then not a problem.
The CGT and IHT issues are somewhat simpler if she was your wife!
David
M001 said:
Thank you both for your confirmation.
I will talk it over and see what the options are re the best savings accounts. Although most are pretty dire interest wise.
I won't mention the "wife" bit as that could cause a whole different issue!!!
There's no longer any tax benefit for being married, in fact, it's more likely to be penalised. Welcome to 21stC Britain.I will talk it over and see what the options are re the best savings accounts. Although most are pretty dire interest wise.
I won't mention the "wife" bit as that could cause a whole different issue!!!
CaptainSlow said:
IHT not CGT. You can use the unused balance of your spouse's IHT allowance once you pop your clogs.
What happens if I want to put my wife's name on, say, a second property that we have so that I can use her CGT allowance when we come to sell ??Or perhaps, give her 8% of my company shares so that she automatically receives £10m of Entrepreneurial Relief in the event of a sale ??
Would I not be right in thinking that if she were not my spouse I would be unable to do this without incurring a CGT liability ??
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