Did you know that your spouse can use their tax-free allowance as part of your financial planning, by making up to £6,475 of your household income tax-free, every year?
With just a little financial advice, your spouse’s personal tax allowance offers a perfectly legitimate opportunity for avoiding tax, within your general financial planning.
Every one of us has a personal tax allowance of £6,475 which applies to all income, whether it comes from working or from savings. This also applies to your spouse, even if they are not working.
Why let this allowance go to waste? The allowance can be used to avoid tax on interest in a bank or building society account in their name.
Here are the simple steps to achieve this.
First, transfer your savings into an account in the name of your non-working spouse. Then fill in an R85 form for the Revenue. Once that’s done, the bank or building society will add the interest to the account without deducting tax.
This also applies if your savings are already in a joint account in both your names. Fill in the R85 form, and any amount you earn in interest, up to £6,475, will be free of tax.
The principle can also apply if your spouse is working part-time, but using only part of their tax-free allowance. You could still get the benefit of the rest of their allowance, by holding the savings in their name.
Even for working spouses, savings can be made where one spouse is paying the basic 20% rate of tax, but the other is a higher-rate taxpayer who pays 40%.
If you have taxable income from other sources, including investments, that are in the name of the higher earner and therefore subject to 40% income tax, they can be transferred to he lower earner, so that any taxable income would be taxed at just 20%.
Contact Principle First for further strategies for using your tax allowances efficiently to avoid tax.
Make an online financial advice enquiry or ring freephone 0800 678 5929 now.
