Tax efficient family finances

Each spouse is taxed separately, with their own allowances, tax rates and bands. For tax purposes, looking at household income in the round will enhance efficiency.

Aim to distribute income between spouses so that personal allowances, Savings Allowance (SA) and Dividend Allowance are used fully. This will also lessen the impact of higher and additional rates of tax.

Savings income

Transfer of savings income can be beneficial where one spouse is a higher rate taxpayer, and the other pays at basic rate, enabling full use to be made of the SA available.

Tip: sharing savings income

Transferring just £1,000 savings income from a higher rate taxpayer who has used their SA in full, to a basic rate spouse, with no other savings income, could save up to £400 p.a.


Allowances can't normally be transferred between spouses, except for the blind person's allowance, and, in certain circumstances, £1,250 of the Personal Allowance (PA). This is the 'transferable tax allowance for married couples and civil partners' - often called the 'marriage allowance'. Transfer can be useful in circumstances where neither is a higher rate taxpayer and one spouse hasn't fully used their PA. The detail of these particular rules makes it important to check that this transfer will work in your favour, and we are happy to advise further here.

Tip: working together

If you work for yourself, employing your spouse, or taking them into partnership, can redistribute income for maximum tax efficiency.

  • This tactic can be helpful for trades, professions or property investment businesses generating rental income.
  • Always make sure wages are actually paid: book-keeping entries alone aren't enough.
  • Any payments should be commercially justifiable.


You may be able to consider gifting assets between you and your spouse to distribute income more evenly; but gifts must be outright and unconditional.

Any income arising from assets jointly owned by spouses is usually assumed to be shared equally for tax purposes. This is the case even if an asset is owned in unequal shares – unless you make an election to split the income in proportion to ownership.

One exception to this is dividend income from jointly-owned shares in 'close' companies. Most small, family-owned, private companies fall into this category. Such dividend income is split according to actual ownership of the shares. This means that if, say, one spouse is entitled to 95% of the income from jointly-owned shares, they pay tax on 95% of the dividends from the shares.

Capital gains tax

Higher rate taxpayers pay more CGT, making it important which of you disposes of an asset. Each spouse has a CGT annual exempt amount. You can usually transfer assets between you and your spouse at no gain/no loss – without an immediate tax charge.

So, if you own an asset, which is to be sold, in your sole name, and you've already used your CGT annual exemption, consider transferring it to your spouse. If they haven't yet used their annual exemption, or pay tax at a lower rate, it may be more efficient for them to sell, rather than you.

Please ask us for further advice to make quite sure such transfers will be effective for tax purposes.