Ask the Expert: Can I transfer savings to my wife to cut my tax bill?
My wife and I are both retired - we're in our 70s. I have a personal pension on top of my state pension which gives me a total income of about £25,000 but my wife only has her state pension. We have a few savings plans but the interest doesn't come to more than about £300 a year. We also have a small investment portfolio which gives us additional income of around £500 a year. These investments are in my name so I pay tax on the income. Can I transfer these to my wife's name to save on the tax?
Response from Carl Lamb of Almary Green
The short answer is yes, indeed you can transfer your investment portfolio to your wife’s name and the income would then count towards her personal allowance.
As this is a transfer between spouses, there would be no capital gains tax to pay on the transfer.
That said, you may not need to do this as the first £2,000 of any dividend income from investments in the 2018/19 tax year would be tax-free. You also each have a personal savings allowance that covers your interest from savings up to £1,000 in the current tax year.
However, what your wife could consider is to transfer £1,190 of her personal allowance to you, provided she has an income of less than the personal allowance (currently £11,850) and you are a basic rate taxpayer.
This is permitted under HM Revenue & Customs (HMRC) rules and is known as the marriage allowance.
The result of this is that your wife would have a lower personal allowance and you would have a higher one.
To do this your wife needs to apply to HMRC – this can be done online – and your new personal allowances will be applied through new tax codes.
This can take a couple of months or so for HMRC to organise, but the change will be backdated to the start of the tax year on April 6 this year. You can claim for earlier tax years too, back to April 5, 2015.