Who pays tax on a joint bank account?

There are many situations where getting a joint bank account may seem like the next logical step - for example, if you are newly married.

There are a number of pros: for example, a joint bank account may be more convenient if you share bills or other financial commitments with someone else. You could choose to open a joint savings account if you share the same savings goals, like a holiday or a new house.

Opening a joint bank account with someone is a sign of great trust, partly because each person is both jointly and wholly responsible for any debt incurred.

Click here for more information about opening a joint thinkbanking account.

So who is responsible for any tax?

Each person is usually equally responsible for any tax on the interest paid on an account: if there are two account holders, they will normally pay tax 50:50.

This can work out perfectly well if all the account holders pay tax at the same rate. Complications can arise, however, when the account holders pay tax at different rates.

For example, if one individual pays tax and the other does not, it's up to the bank or building society to decide if it'll let part of the interest be paid without the tax taken off - and part of it paid with tax taken off. If that's not an option, the partner who doesn't have to pay tax can submit a form to HMRC and claim it back.

Are joint bank accounts a good idea?

Tax isn't the only thing to think about if you're considering a joint bank account. For example, some joint accounts allow one person to take all the money from the account without the permission of the other. It's therefore vital you're sure that you can trust your fellow account holder. It will also help to understand all the rules of the joint account you're thinking about, so you know exactly what you are, and are not, signing up to.

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