“Do you trust your wife?” Do you remember when Hollywood last dabbled in a little financial planning?
The question was posed when ex-accountant, now prison inmate Andy Dufresne had the temerity to offer some financial advice to the brutal chief prison warden, in the 1994 film ’The Shawshank Redemption’. His well-meaning attempt to offer a little financial planning almost got him thrown off the prison roof.
The fact is that, if your spouse is not working, then passing assets to him or her really can be a great way of avoiding tax.
Although they may not be working, your spouse still enjoys an income tax allowance that can be used to avoid tax on up to £6,475 of your household income.
The income can come from interest on any savings in a bank or building society account in their name. You can transfer your savings into an account in the name of your non-working spouse, and avoid tax on the interest by simply filling in an R85 form for the Revenue. Once that’s done, the bank or building society will add the interest, without deducting tax.
Another handy way to earn back the cost of that engagement ring applies in particular to the self-employed, or to company directors.
By employing your spouse, even on a part-time basis, you can pay them up to £110 per week gross, with no income tax or National Insurance contributions to pay.
This is an ideal way of making up to £5,000 of the profits from your company tax-free.
An additional benefit is that your spouse will also build up credits for the 2nd State Pension as well!
