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HMRC internal manual

Savings and Investment Manual

Interest: taxation of interest: joint accounts

Where interest arises on an account held in the joint names of spouses or civil partners, each will normally be taxable on half of the interest, under ITA07/S836. Where, however, their beneficial entitlement to interest (or any other income from a jointly owned asset) is not actually 50:50, they may elect to be taxed on their actual entitlement. Guidance on jointly held property, previously found at IN115+, can be found at TSEM9805 onwards (SAIM20000). Note that certain cases require referral to CAR (Charities, Assets and Residence: Trusts).

Where a savings account or other source of interest is owned jointly by persons who are not spouses or civil partners, they will be taxed on the interest to which they are actually entitled. In most cases, the practical result is that interest will be split equally between the account-holders. This is because the funds held in bank, building society or similar accounts in joint names are usually intended by the account holders to be held in joint ownership; irrespective of how much each has contributed. This means that each account holder is entitled jointly to all of the funds in the account, and interest is paid to the account holders jointly. Where there is no, or insufficient evidence, to show that the account holders intended the funds in the account to be held in joint ownership or in specified shares, the parties will be taxed according to the share of funds that each has respectively contributed.

Common ownership

Exceptionally, two or more people may hold an interest-bearing asset in common ownership (in England and Wales, as tenants in common). They will have identifiable shares in the asset, and they will be chargeable to the interest that arises on their share. Any case where the parties claim that a tenancy in common exists should be referred to CAR (Trusts).

There may be other situations where property in the name of one person is claimed to belong to two or more persons. The operation of general law will determine the extent of any beneficial interest in the property, usually by way of resulting trust by constructive trust. These aspects can be particularly complex and all such cases should also be referred to CAR (Trusts).

Trading income

If, however, an account is held in the name of a trading partnership, and interest on the account is treated as a trade receipt (see BIM40805 - SAIM20000), the interest will form part of the trade profits that are divided in accordance with the partners’ shares. Where the partners are husband and wife, or civil partners, the normal ‘50:50 rule’ does not apply (ITA07/S836 (3)).