If one spouse or civil partner is working and the other has no taxable income, it is worthwhile considering transferring income producing investments to the non-working spouse/civil partner in order to utilise their personal allowance e.g. bank interest, dividends and property income.
This will save tax on the income and will increase the overall return from these investments. This can be useful with even the smallest amounts of savings.
Use Non-Taxpayers’ Allowances
e.g Mr and Mrs Smith have £25,000 in savings. The entire amount is held in Mr Smith’s sole name.
Mr Smith is a higher rate taxpayer and pays tax at 40%. Mrs Smith does not work and has no taxable income. At present, the interest received of £500 suffers tax at 40%, leaving a net amount received of £300.
By transferring this money into an account in Mrs Smith’s name and utilising her personal allowance, the interest can be received free of tax. This means that an instant tax saving of £200 can be made.