Higher tax rate question

Yes

Yes

Not exactly, it will be taxed as now, but you will need to declare your part of the interest on your tax return and you will get a bill for the extra tax.

Time to give the missus a nice pressie ? (give her all your joint savings and it'll only be taxed at her rate)

Yes.

Yes.

It will be taxed at 20%, so you should declare 50% of the interest paid, so that they can tax your share at 40%. You should ask for a tax return form to do this, if you don't already receive one.

Indeed - if you trust your wife not to run away with the proceeds ;-). (You just beat me to it!)

Correct

Correct

The interest would be assumed to be split 50/50 unless you specify otherwise.

In message , BrianW writes

But only 18% extra need be paid.

Well yes. Makes all the difference.

"John Boyle" wrote

Eh? 18% of what? 40% - 20% = 20% ...

The difference between basic rate tax (22%) and high rate tax (40%).

"BrianW" wrote

Eh? Try again - we're talking about *savings* here (not earnings). So basic rate tax (as deducted at source from the interest) is only 20%....

No, interest is taxed at source at 20% (basic rate tax on interest is 20% not

So you pay an extra 20% on the gross interest, or 25% on the net.

Yes. Interest on investments is taxed at 20%. So if you are a high rate taxpayer, you effectively pay 38% tax on the interest, as it increases the amount of your income that should have been taxed at 40% (rather than 22%). I didn't invent the rules. Complain to HMR&C.

You could be right there. I'm getting confused now. I gross up the interest that way on the tax return. Nice to have such a simple tax regime isn't it.

BTW put a space after the "--" to get your sig omitted from the reply.

"BrianW" wrote

No, you effectively pay 40% ...

"BrianW" wrote

You don't seem to *understand* the rules!

Many thanks for all your replies - very helpful.

I am planning transferring the joint account into one of her own - you should have seen her eyes light up ;-)

Shes' been warned under pain of death though... :-O

Jeff

Also consider index linked savings certificates instead of premium bonds.

I think I was getting confused by John Boyle's comments. :-) I expect to pay an extra 20%. I (now) agree that the basic rate is irrelevant here. Apologies.

The only downside of that is that you no longer have access to the account. Well in theory. Set up online banking in her name and don't tell her the security information. ;-)

Are they as much fun ? Or as much of a dissappointment ?

Cheers Rob - will look into it

Jeff