Joint accounts - Tax on interest

Accountants I know do it 50% of balance - regardless of who put what in. The idea being that it's a joint account so equally half-half ownership/liability.

In message , T. writes

Actually, from a banking point of view 'joint' ownership means 'joint & several' which means that each party owns all the balance. On the other hand, HMR&C take the default view that ownership is not 'joint' but 'in common' with the default split being 50/50. However, AIUI, it is possible to allocate the split in other proportions but documentary evidence as to the justification of this may be required.

It's split 50/50 by default. I don't think it matter who put what in. Theoretically you can nominate a different split but I don't know how you'd do it in practice and it'd be too much hassle.

Mrs O should ask the bank for a form (R85 IIRC) to state that she is a non taxpayer and the bank will pay half the interest gross, and the other half net. Mr O should be careful when he fills in his tax return and remember to half the

*gross* interest on the annual interest statement not the net interest, and *not* to halve the tax paid.

If it's a savings account which Mr O doesn't need to operate in person, it may be an idea to put it in Mrs O's name only so the full interest is tax free. This assumes Mr O trusts his wife :-)

Thanks everyone, your responses answer my question.

If you don't want it split 50:50, it is probably better to use 2 single accounts.

But you might want it to be in a joint account even though all the money comes from one of the pair and all the interest is declared on that person's tax return.

For example, you might want a joint account with enough money for the survivor to live on, following the death of one of them, until probate is granted. With a joint account the survivor gets access just on production of the death certificate.

Robert IANAL

Eh? With a joint account the survivor *already has* access.

In message , Robert writes

The survivor doesnt even need to that for withdrawals. It will be needed to delete the deceased's name of course.

Sorry, yes. I stand corrected. the survivor can go on using the account but needs death cert to remove the deceased's name. Robert

"The survivor doesnt even need to that for withdrawals. It will be needed to delete the deceased's name of course."

I also should have added: If the account is joint with "both to sign" then I think that only the death certificate is needed to remove the deceased's name but a grant of probate is not needed. This then provides a way of leaving money to someone else, so they can use it after die, for which they don't have to wait until probate, but which they cannot use (without your agreement) before you die.

Have I understood this correctly?

Robert

"Robert" wrote

Equally, *you* can't use it without *their* agreement!

In message , Robert writes

Yes.

It may be interesting to note that if the joint holder is NOT spouse then half of the account balance at the time of death will be added into the deceased's estate for IHT purposes.

Half the balance will be added into the estate EVEN IF the joint holder is spouse, unless the spouse is keeping the dosh.

For example, an IHT minimisation exercise in relation to the death of the surviving spouse may provide that the "deceased's half" of the joint account balance should go directly to the children.

That may be so in Whisky Land but it aint down here. If the account is held 'Jointly' with spouse then it isnt included in the deceased's estate due to the inter spousal rules and irrespective of the deceased's will. But, if held 'in common' with spouse then the deceased's share goes into the estate like any other solely owned asset. The bank wont know any difference of course.

Not necessarily - it could depend on the contribution levels - so it could be 100%.

In message , Doug Ramage writes

Yes, but the default level is 50/50 I believe in the absence of any other allocation.

Am I right that strictly it isnt the contribution levels but the 'beneficial' level? Cant seem to find the reference now!

IIRC, the beneficial level is the starting point which may be modified by contribution (and other factors).

This is not a Whisky Land issue, the tax rules are the same as in Gin Land.

I think you're mistaken. Normally a will cannot dispose of shares of assets held jointly because there *are* no shares, and because the co-owner *already* owns the whole asset. But for IHT purposes jointly held assets are treated the same as in-common ones in that a transfer is deemed to be taking place. Of course transfers to a spouse are exempt, but the deceased can have held accounts jointly with other people as well as the spouse, so it's simpler to list all joint assets in the estate and then to subtract out again those which are in fact "transferred" to a spouse.

AIUI a deed of variation (obviously with the spouse's consent) can cause half the account balance to go to the children, even though it was a joint account (so presumably this deed has the side-effect of severing the jointness and transmuting it into in-common, and this is *not* viewed as the only other thing it could be, namely that the surviving spouse is making a potentially taxable gift), and in this case the half which goes to the children would be taxed as though it had been in the estate, and therefore, the sum in question would then *not* be subtracted out again since it is not being "transferred" to the spouse.

Of course.

It should know whether the account is joint or in common, irrespective of whether the co-holder is a spouse or not, and should freeze (half?) the account, if not joint, until probate. But I imagine in-common accounts would be quite rare.

In message , Ronald Raygun writes

I agree, perhaps we were talking at cross purposes.

They are, and I have only known the joint tenancy being severed after death by DoV. None the less, in my days there was no mechanism for recording such an arrangement.