The taxation of money in joint bank accounts is dependent on who owns it. It is not uncommon for joint bank accounts to be set up just for convenience when an elderly person is struggling to manage their affairs. In these circumstances, the money will be treated and taxed as if belonging to the person who paid the money in.
H.M. Revenue & Customs (HMRC) will normally treat accounts, where the person who paid in the money is able to draw out the whole account, as the paying party’s money. As such all of that money will be taxable on death as set out in section 5(2) of the Inheritance Tax Act 1984 (IHTA 1984).
There is a subtle difference between the above scenario and the case where an account is set up as a joint account and hence the account passes to the surviving account holder on death. Some banks will pay out the whole account to the surviving party. In these circumstances inheritance tax (IHT) is payable by the person who receives the money, rather than by the executors, unless the Will provides otherwise. Whilst HMRC may go against the executors if the money is not paid, they will first pursue the joint account holder.
There may be problems if it is intended that only part or half the monies in the account pass over to the non-paying account holder on setting up of the account. People may wish to have this result, if they are to take advantage of the IHT potentially exempt transfer rules, which after seven years mean that IHT is not payable.
However, the HMRC are reluctant to accept that the gift was made unconditionally before death. Often, as in the case of Matthews v HMRC  UKFTT668, HMRC will not accept that part of an account was transferred and hence is not liable to IHT. In that case, the court held that section 5(2) of the IHTA 1984 applied because Mrs Matthews remained free to withdraw any of the monies. She had a reservation of benefit in all the monies hence the whole sum was liable to IHT. You cannot have your cake and avoid tax on it.