personal allowance

[catmando]

My wife receives no income in her own name as she doesn't go out to work. However, she has recently come into a small inheritance. Will she be taxed on all the income arising from this - amounting to only a couple of £k's pa? Or will her personal allowance permit her to receive an element of income tax free? If the latter is correct should she claim a refund for any tax deducted at source or should she apply to HMRC to receive her income gross? Any info. on this will be gratefully received. Thanks.

[factor-fiction]

She can simply ask her bank for interest to be paid gross if her total income including the interest is less than the personall allowance which is over £6000 pa. She can ask the bank for the relevant form

[Buenchico]

Has your wife actually got a personal allowance? If you've been doing the sensible thing she should pooled it with yours, reducing the amount of tax which you pay on your own income. If she's done that, any income she receives will then be taxed on the whole amount.

If your wife has retained her own personal allowance she will be able to receive all of the income from her inheritance free of tax simply by completing the form which Factor30 refers to. However she'd still be wasting a large part of her personal allowance. Your combined income would be higher if you pooled your allowances.

Chris

[hc4361]

You have been able to pool your tax allowance for 10 years.

In 2000, the Married Couple's Allowance was scrapped, and non-employed parents were stripped of their right to a tax-free allowance. Today, if both parents go out to work and put their children into childcare, the government gives them each a £6,035 tax-free allowance, as well as heavily subsidising their child care costs. But if they prefer to look after their children themselves, sacrificing one income and foregoing all the child care subsidies, the government penalises them by making the stay-at-home parent forfeit her (or his) right to a tax-free income.

[hc4361]

Have not been able to pool tax allowances for 10 years.

[factor-fiction]

Normally I fully agree with the very helpful and knowledgeable Buenchico but on this occasion I'm puzzled as, like hc4361, I understood that the facility to transfer a tax hasn't existed for years. However Buenchico may mean that catmando should have been putting his own savings in his wife's name so they could get any interest free of tax, so thenew income from the inherited cash would need to be added to the existing savings interest.

[catmando]

Thanks to all for contributions. I understand (a) possible to get bank to pay my wife gross (by her applying to HMRC) as her total income <personal allowance; (b) cannot use her pa against my income as mine is all subject to paye - ie earned not investment income. thanks again.

[factor-fiction]

Hi- I agree with your summary except you should be able to get the gross interest declaration form from your bank- you don't have to get the form from HMRC.

[Skyline D]

A very rare instance of Buenchico being wrong I think. You cannot pool your personal allowances. I've been an accountant for nearly 20 years and never known it to be possible, though I suspect it used to be sometime before that. You could transfer some of your own investment assets into your wife's name (if you had any) to take advantage of her allowances but that's not the same thing and isn't relevant here anyway per your second answer.

As has already been said you can certainly obtain any bank interest gross by filling in the appropriate form. If the investments are in another form such as shares that's different.