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As a general rule, assets owned by spouses in joint names are treated by the Taxman
as shared equally by both partners, and any income produced will be taxed accordingly. But where actual ownership of an asset differs from 50/50, a married couple can elect to be taxed on their actual share of any income it produces. However, until 2011 the Taxman would not accept an election for unequal ownership in respect of bank accounts. His view was that any interest a joint account produced must be declared and taxed on a 50/50 basis because the money in joint accounts is equally accessible to both spouses. In practice, where both spouses pay in and withdraw money from an account, it can be virtually impossible to say how much of the balance belongs to each. This means it’s also impossible to say how much interest each is entitled to. This problem can be overcome by spouses agreeing how much money in an account belongs to each of them. Use our draft agreement to indicate who is the beneficial owner of the money in your joint bank accounts and thus the extent to which interest is taxable on each of you. When you make an agreement you can submit a Form 17 election stating how the interest is to be allocated for tax purposes. A Form 17 can be viewed and downloaded from the HMRC website Download here. A Form 17 must be sent to the Taxman within 60 days of the date of declaration. This deadline will not be extended for any reason. Send a copy of the agreement with the Form 17.
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