A couple has two personal allowances and two basic rate bands. Using both can save a lot — but only where the asset genuinely moves, not just the income.
Where one spouse or civil partner pays tax at a high rate and the other does not, moving income-producing assets between them is one of the simplest and most effective pieces of planning available. Each individual has their own personal allowance of £12,570 and their own basic rate band running to £50,270, and income taxed at 40% in one person's hands can be taxed at 20% or nothing in the other's.
The rules that make this work are also the rules that stop it being done on paper. Transfers between spouses and civil partners living together are generally on a no gain no loss basis for capital gains tax, which means the asset can move without triggering a disposal — and that same generosity is why HMRC insists the transfer be real.
The Line Between Working and Not Working
| Arrangement | Does it work? |
|---|---|
| Transferring shares outright to a spouse | Yes — the income follows the asset |
| Putting a savings account in a spouse's name | Yes, if the money is genuinely theirs |
| Adding a spouse to a property title | Yes, subject to how the income is then split |
| Paying a spouse a salary for no real work | No — not deductible, and it invites questions |
| Diverting income while keeping the asset | No — the settlements rules apply |
| A gift with strings attached | No — a retained interest defeats it |
The settlements legislation is the boundary. Where you give away income but keep an interest in the underlying asset, the income is treated as remaining yours. There is an exemption for outright gifts between spouses, but it does not extend to gifts that are wholly or substantially a right to income rather than the asset itself. A genuine, unconditional transfer is the safe version.
Property Is a Special Case
Rental income from property held jointly by spouses is automatically split 50/50 for tax purposes, regardless of the actual beneficial shares. That default is convenient where the split is what you want and unhelpful where it is not.
Where the underlying beneficial ownership genuinely differs — say 90/10 — a declaration on Form 17 can have the income taxed in those proportions instead. Two points matter. The declaration only reflects reality, so the beneficial interests must actually be unequal and be documented. And it takes effect from the date it is made, not retrospectively, and must reach HMRC within a time limit of being signed. Our non-resident landlord guide covers the position where one spouse lives abroad.
What Cannot Be Split
- Employment income. It belongs to whoever did the work, full stop.
- Pension income. It belongs to the member.
- Self-employment profits, which follow the person carrying on the trade.
- Salary paid to a spouse who does not work in the business — a deduction requires the payment to be wholly and exclusively for the trade and to reflect real work at a commercial rate.
What Else Two Allowances Give You
- Two capital gains annual exemptions. Moving part of a holding before a sale doubles the exempt amount — see bed and ISA and capital losses.
- Two personal savings allowances, at different amounts depending on each person's band — see the Personal Savings Allowance.
- Two ISA allowances, at £20,000 each.
- Two dividend allowances.
- Marriage Allowance, where one partner does not use their full personal allowance and the other is a basic rate taxpayer.
- Moving income out of a taper. Reducing one partner's adjusted net income can restore personal allowance or avoid the child benefit charge — see adjusted net income.
Think About What You Are Actually Doing
A transfer that works for tax works because ownership genuinely changed. The asset is theirs, they can spend it, and it is theirs in a separation. That is not a reason not to do it — most couples are entirely comfortable with it — but it should be a decision rather than a side effect of a tax calculation. Couples where one partner is moving abroad should also read keeping a UK home while abroad, since a spouse remaining in the UK affects the residence position of the one who leaves.
Frequently Asked Questions
Can I just put income in my spouse's name to save tax?
Only by genuinely transferring the underlying asset. Diverting income while keeping the asset falls foul of the settlements rules and the income is treated as remaining yours.
How is rental income from a jointly owned property taxed?
It is split 50/50 by default between spouses and civil partners, regardless of the actual shares. A Form 17 declaration can change that where the beneficial interests genuinely differ.
Does transferring shares to my spouse trigger capital gains tax?
Generally not. Transfers between spouses and civil partners living together are on a no gain no loss basis, so the asset moves at your base cost rather than at market value.
Can I pay my spouse a salary from my business?
Only for real work at a commercial rate. A deduction requires the payment to be wholly and exclusively for the trade, and a salary for no genuine work is not deductible and attracts attention.
Related Guides
Keep reading with these related guides and calculators:
- Adjusted net income — moving income out of a taper
- Personal Savings Allowance — two allowances, different amounts
- Bed and ISA — two exemptions, two allowances
- Non-resident landlords — when one spouse lives abroad
- Marriage tax benefits — Marriage Allowance in detail
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