HMRC issues warning for couples who have £1,000 sat in joint bank account
HMRC has issued a warning to couples who have £1,000 in interest sitting in joint bank accounts. Analysis of HMRC data from AJ bell shows the number of basic-rate taxpayers being hit with the tax will near 1 million people, up from just half a million in 2022/23.
Nearly 2.1 million Britons are expected to pay tax on their savings this year, a sharp increase from around 650,000 just three years ago. The PSA allows basic rate taxpayers to earn £1,000 in interest tax-free, higher rate taxpayers to earn £500 allowance tax free whilst additional rate taxpayers receive no exemption.
Laura Suter, director of personal finance at AJ Bell, commented: "Previously the majority of people didn't need to worry about paying tax on their savings, as interest rates were low and the Personal Savings Allowance was sufficient to cover most people."
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Interest in joint names accounts are split 50:50 between the two account holders. It could mean they have taxable interest that they hadn’t realised. For example, a joint savings account that generates £1,000 interest each year would be split so that each partner has £500 interest to count towards their Personal Savings Allowance.
Ms Suter said: “If one half of a couple is a lower earner, and so in a lower tax bracket, it could make sense to move the savings into an account in their name, as any interest that’s taxable will be paid at a lower rate. If one half hasn't exhausted their Personal Savings Allowance you could move savings into their name to maximise their tax-free amounts.”
Ms Suter warned: "For those taxed under PAYE, HMRC will calculate any tax due based on information sent to them by banks and building societies. It means many taxpayers will find there is a deduction made from their payslip each month, often before they've even realised they owe any money to the taxman."