Joint savings account tax question

[staffordian]

I'm pretty sure I know the answer, but thought it was worth checking, given the complexities of income tax...

Mrs S and myself have a joint savings account, but almost all of the money in there belongs to Mrs .

I'm a tax payer, she is not, but with the recent rise in interest rates, the amount of interest received has been reasonably significant.

I'm assuming that I have to pay tax on half of it (or to be accurate that part of half which is over £1k), but I wondered if there was any mechanism to declare that the interest is Mrs S's, even though it's a joint account

In other words, is it set in stone that joint account interest is allocated 50/50 or is there an alternative, apart from opening a separate account solely in Mrs S's name?

Thanks in advance for any thoughts.

[genou]

You can report the income allocated according to the underlying contributions to the account ( which can be zero, e.g. one account holder is only there as an administrator ) . It would be wise to be able to demonstrate the origin of the funds if HMRC choose to ask.

[staffordian]

You can report the income allocated according to the underlying contributions to the account ( which can be zero, e.g. one account holder is only there as an administrator ) . It would be wise to be able to demonstrate the origin of the funds if HMRC choose to ask.

Thanks, that's interesting.

The account is a savings account linked to our current account and currently pays 4.75%, not to be sniffed at. I keep a maximum of £1000 in it, to be able to shift it quickly into our current account if needed (though not much of an issue with instant transfers being common these days). Mrs S has about thirty times this, so even declaring a 90%/10% split would be safely overestimating my share, but would take my interest income under the £1000.

Would it simply be a case of declaring (say) 10% of the interest on my tax return and adding an explanation in a note somewhere?

TIA

Perhaps I should add I'm looking at 2024-5, not the tax return for 2023-4, so maybe we'll get a pre-election uplift in the savings allowance and the problem will disappear, it's only a one off anyway as all my savings are now ISA'd

[Lootman]

You can report the income allocated according to the underlying contributions to the account ( which can be zero, e.g. one account holder is only there as an administrator ) . It would be wise to be able to demonstrate the origin of the funds if HMRC choose to ask.

That is true but I would argue from direct first-hand experience that this is not something the taxman normally gets too petty about. And in practice you can vary the reporting of income as long as you have a reasonable basis for it.

A similar example happened to me with a BTL property I used to own. I owned it jointly with my wife but I did all the management, collected the rents, paid the bills and my wife was basically a passive investor. 100% of the income was reported by me and my wife declared nothing. (The eventual sale proceeds were split 50/50 however).

As it happened this was one of the very few times I ever got a query from the taxman, although on another issue and not the 100/0 rent split. But I asked him about us splitting the rent up this way and he just shrugged and smiled, indicating to me that this is just not something the taxman cares about. They seem to look at the business as a single venture and want to be sure that the correct tax is paid in total, but do not care who actually pays it.

The one exception might be if one spouse is a 45% tax payer and the other is a 0% taxpayer. Dumping all the income on the non-taxpayer to pay less tax overall may well be deemed a bit naughty. But otherwise I'd be comfortable with a non-equal split, as long as there is a rational basis for it.

[chas49]

The Taxation Web article here suggests that you need to declare the unequal split using Form 17, and the declaration os effective from the date you make it (not retrospectively)

[bluedonkey]

The Taxation Web article here suggests that you need to declare the unequal split using Form 17, and the declaration os effective from the date you make it (not retrospectively)

This is correct and what I was going to post but you beat me to it!

[Lootman]

The Taxation Web article here suggests that you need to declare the unequal split using Form 17, and the declaration os effective from the date you make it (not retrospectively)

This is correct and what I was going to post but you beat me to it!

That source indicates that the rules are rather different depending on whether the joint owners are married or not.

That makes sense since a couple in a marriage or a civil partnership can easily move cash, accounts and assets back and forth between them, without causing a tax event. So letting them optimise the amount of income each declares is reasonable as the couple could easily adjust the ownership percentages anyway, in a manner that an unmarried couple could not.

In my case I wanted ownership as a joint tenancy and so that has to be 50/50 anyway. But the income can still be split differently.

[DrFfybes]

FWIW MrsF pays borderline higher tax, I pay no or very little tax.

The account is a savings account linked to our current account and currently pays 4.75%, not to be sniffed at. I keep a maximum of £1000 in it, to be able to shift it quickly into our current account if needed (though not much of an issue with instant transfers being common these days). Mrs S has about thirty times this, so even declaring a 90%/10% split would be safely overestimating my share, but would take my interest income under the £1000.

We looked at this option but decided in the end it would be less hassle for us to both have our own savings accounts, except that mine has a couple more zeroes on the end of the balance than hers. Also as much of the money in there comes from her salary then gifting it to me keeps things much simpler.

If we need to move £20k or less it seems to be pretty much instant, and as that's per day then if we really needed £40k can be moved overnight.

Paul

[chas49]

This is correct and what I was going to post but you beat me to it!

That source indicates that the rules are rather different depending on whether the joint owners are married or not.

Well, yes. But the OP was specifically about a married couple.