My wife and I have savings in a joint account. Could splitting them cut our tax? ...Middle East

Question: I become a pensioner in a few days time, I have savings and my understanding is that you pay tax on any interest payments above £1,000. My money in question is in a joint account between myself and my wife. So is that £1,000 each or between us, as it is joint?

The good news is that the Personal Savings Allowance (PSA) is applied per individual, so on a joint account you both have your PSA. So even if you hold your savings in a joint account, each named account holder is entitled to their own allowance – £1,000 for basic rate taxpayers, £500 for higher rate, but sadly nothing for additional rate taxpayers.

square RETIREMENT

I'm 80 and not getting the full state pension - why? Paul Lewis replies

Now that you’re approaching retirement, it’s a good moment to reassess not just where your savings sit, but how they’re structured between you and your wife. If one of you is a non-taxpayer or has a lower income, it may make sense to hold more savings in that person’s name, since their unused personal allowance could help soak up more interest without triggering a tax bill.

It’s also worth considering whether a joint account is still the most tax-efficient option. Cash ISAs remain a solid choice for tax-free savings. Each of you can contribute up to £20,000 a year, and any interest earned is free from tax and doesn’t count towards your PSA. This can be especially helpful if you’re earning close to the PSA threshold and want to shelter more income from HMRC.

Of course, if your savings pot is more substantial or long-term in nature, you might also want to explore Stocks and Shares ISAs. These come with investment risk, but for money you don’t need immediate access to, they could offer better returns over time, especially as inflation gradually eats away at cash.

So, in summary, your joint savings account interest will be split between you both, and you each have your own allowance. But with retirement just around the corner, this could be a great opportunity to check whether your money is not just safe but smartly arranged.

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