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Save tax by passing savings to my wife?

Saving | Savings Accounts Helpful? 11

Asked by momist, submitted 06 April 2011.

Open Quote I have a redundancy payment and retirement grant to put into cash savings - over and above my ISA allowance and other investments. As I remain a tax payer on my pension, but my wife isn't, what is the legal position if we put all the money into a savings account in her name? Could it be seen as income for her (a gift), or a capital gain?End Quote

Answered by Justin on 06 April 2011

The legal position is that you're allowed to and it's usually a very good idea.

There's no tax on passing the money across to your wife. The interest generated in future from the savings will obviously be taxable as her income, but provided she's a non-taxpayer (if so, remember to complete form R85 to receive interest gross) or in a lower tax band than you then it'll save tax overall. And don't forget your wife could use her ISA allowance too (if she hasn't already).

Perhaps the only downside, in some people's eyes, is that it means trusting your spouse with your money!

Capital gains tax (CGT) doesn't apply to savings accounts, but if you have investments like shares where CGT does apply then it's also often sensible to split them with your spouse so you can use both of your annual capital gains tax allowances. There's no capital gains tax chargeable when transferring assets between spouses - the spouse is simply deemed to have purchased the asset at the original price their partner paid.


Please note this answer does not constitute a recommendation or financial advice and should not be relied upon when making specific investment or other financial decisions. You should always undertake your own research into whether a product or service is appropriate for your needs and, if necessary, use a qualified professional adviser.

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