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    Income tax for your Chinese wife?

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    makem
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    Income tax for your Chinese wife?

    Post by makem on 30/03/11, 11:55 pm

    senario:

    Your wife does not work
    Has been in the UK less than 2 years
    Has a cash/invetment ISA in her name
    Has other savings income below the single persons allowance
    Has no other income in the UK
    Has income in China which stays in China and is taxed there.

    Question:

    Does she have to notify the IR that she has income even though it is below her allowances?

    The source paying taxable income would be taking off 20% at the end of the year, which would need to be claimed back so that claim could be the notification?

    It would be interesting to know how la po's apportion their finance to avoid tax.
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    chinatyke
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    Re: Income tax for your Chinese wife?

    Post by chinatyke on 31/03/11, 03:04 am

    Eric,
    This is very much like my situation in reverse. China and UK have a 'Double Taxation Treaty' so that tax on earnings is only paid once. If your wife wants to reclaim tax that she has paid or to receive interest without tax deductions then she will need to register with HMRC and declare her earnings. If her earnings are below her personal allowance she would have no tax to pay. If the option is still available get HMRC to do her tax return and then she wouldn't need to fill in the annual return.
    I pay tax wherever the income arises: UK, China or offshore locations.
    It would be advisable to make an appointment with HMRC or an accountant and get professional advice.
    Graham
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    davidmckendrick
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    Re: Income tax for your Chinese wife?

    Post by davidmckendrick on 31/03/11, 04:41 am

    It is usually possible to fill in a form with the savings institution in the UK to stop them taking tax off at source if you have no other taxable income in the UK. You do not have to declare an ISA.
    As Graham says the Chinese income would be taxed in China and would not need to be declared in the UK because of the "Double Taxation Agreement".
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    makem
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    Re: Income tax for your Chinese wife?

    Post by makem on 31/03/11, 11:02 am

    davidmckendrick wrote:It is usually possible to fill in a form with the savings institution in the UK to stop them taking tax off at source if you have no other taxable income in the UK. You do not have to declare an ISA.
    As Graham says the Chinese income would be taxed in China and would not need to be declared in the UK because of the "Double Taxation Agreement".

    Yes David, I forgot about that facility of telling the institution you are not a tax payer before they deduct.

    I still feel you must tell the IR you have income the first time you get any income in the UK. This gets you into the system.

    If you didn't do that as I suspect many many people don't, then how would they ever know you earned? Only if the provider took 20%.

    I will never forget the time when my daughter worked for the IR. My file was kept in a locked cabinet away from her and I had to provide tax information every year. I was glad when she left.

    This 'every year' business has started again now that I take my deferred state pension but it may settle down again after a year or two.
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    davidmckendrick
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    Re: Income tax for your Chinese wife?

    Post by davidmckendrick on 31/03/11, 03:51 pm

    When my wife started work in May her employer (PAYE) did not deduct tax because she had not worked while in the UK the previous year although she had obtained a NI number. Her income for the year was below her tax allowance. The second year that she was working she was taxed from April although her income per month had not increased. She has never been asked to complete a tax form.
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    makem
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    Re: Income tax for your Chinese wife?

    Post by makem on 31/03/11, 03:59 pm

    davidmckendrick wrote:When my wife started work in May her employer (PAYE) did not deduct tax because she had not worked while in the UK the previous year although she had obtained a NI number. Her income for the year was below her tax allowance. The second year that she was working she was taxed from April although her income per month had not increased. She has never been asked to complete a tax form.

    Thanks for that David.

    On a slightly different tack:

    If your wife is not working you could fill up account/s in her name until the income reached the level where tax would come into effect.

    I remember husbands and wives were jointly taxed and you had to apply to be treated separately. However, as far as I am aware you are both treated separately now. So, as long as the accounts are in her name only and you do not have a written agreement that the money in her account is yours (tax evasion), then she will not pay tax and it is lawful.

    All above assumes you have sufficient funds lol.
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    Re: Income tax for your Chinese wife?

    Post by davidmckendrick on 31/03/11, 04:53 pm

    Hi Eric,
    It also assumes that you trust your wife with most if not all of your savings. Since the accounts are in her name only you would only be likely to get half back in the event of a divorce and she could spend everything in those accounts or transfer them to China without your knowledge. The house in China is not in my name but I'm reluctant to let my wife have free access to my savings because I've already been through two divorces and I'm getting too old to accumulate a new "nest egg".
    Since she already pays tax on her income in the UK the idea of transferring savings to her is not viable in my case anyway.

    When I move to China I will move the majority of my savings to an offshore account with the Nationwide (in the Isle of Man) so that I do not have to pay UK income tax on the interest. If I declare this interest in China I think I will still be below the tax threshold there. I will pay tax on my UK pension in the UK.
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    makem
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    Re: Income tax for your Chinese wife?

    Post by makem on 31/03/11, 05:22 pm

    davidmckendrick wrote:Hi Eric,
    It also assumes that you trust your wife with most if not all of your savings. Since the accounts are in her name only you would only be likely to get half back in the event of a divorce and she could spend everything in those accounts or transfer them to China without your knowledge.

    Yes David, I appreciate that. However, Han has no knowledge whatsoever about our banking system let alone online banking which is how I handle everything.

    I have her pin numbers, passwords, cards etc and within 5 minutes could clear all of her accounts to zero. She uses (and make good use of) a credit card which is how we live day to day. Anything different to that is over her head at the moment.

    I don't think it will every be necessary to worry about her 'running off' with my 'nest egg'.

    In addition, I hold all the information and cards for her accounts in China. Likewise, I could clear those in a few minutes.

    I have had one divorce but had full control via my solicitor and my wife accepted my terms without employing legal help. She has since regretted that Wink

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    Chris Seaborn
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    Re: Income tax for your Chinese wife?

    Post by Chris Seaborn on 31/03/11, 08:48 pm

    This is interesting reading, I wonder if any members have any affiliation with the taxation department? affraid

    Chris.
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    makem
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    Re: Income tax for your Chinese wife?

    Post by makem on 31/03/11, 11:41 pm

    Chris Seaborn wrote:This is interesting reading, I wonder if any members have any affiliation with the taxation department? affraid

    Chris.

    Now why would you wonder that Chris. I wonder?

    Do you think tax avoidance is an offence? Holding the documents on her behalf does not constitute an agreement that the money is not actually hers. I am her financial advisor.

    I know tax evasion is.

    Or maybe you are suggesting we get advice from one who knows?



    Razz
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    Chris Seaborn
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    Re: Income tax for your Chinese wife?

    Post by Chris Seaborn on 01/04/11, 03:10 am

    OK, what you have written here is not evidence that the money in your wife's account is yours, for taxation purposes. If it were, well there can't be many 72 year old Eric's who are married to a Chinese lady living in Chelmsford for the Inland Revenue to check on, (is it still called that?) So, if you removed some or all the money out of 'your wife's' account, could she charge you with theft? As you are a trusting person... just asking.

    Chris.


    Last edited by Chris Seaborn on 01/04/11, 03:18 am; edited 3 times in total (Reason for editing : addition)
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    makem
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    Re: Income tax for your Chinese wife?

    Post by makem on 01/04/11, 08:51 am

    Chris Seaborn wrote: So, if you removed some or all the money out of 'your wife's' account, could she charge you with theft? As you are a trusting person... just asking.

    Chris.

    Yes, I presume that would indeed be possible.

    I am far from being a trsting person but in this instance I have no qualms whatsoever.

    Also, my 6 children are doing well, don't really have a need for more money so losing half of what I have would not make much difference to them.

    I have a long time ago, given up worrying about money and the future. What will be will be, lets be content today.

    There have been stated cases in the High Court in respect of husband/wife finances albiet in respect of remuneration from business. But the outcome hung around the lack of a written agreement.

    All in all, I am happy with my thoughts on the matter, but many thanks for your concern.


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