3 ways you and your partner can help save tax
When it comes to saving tax, you’ll sometimes need the support of your loved ones. Now could be the time to show your tax allowances some love too. Here’s how to work with your partner to help save tax together.
Last Updated: 11 March 2024
Some tax allowances are generous and well-known, others are a bit more complicated. If you’re a high earner or your household income is high, you’ll need to be smart about how you use them.
To have total confidence you’re making the most of your allowances, you might want to make the most of the knowledge and expertise of a financial adviser.
Tax rules can get a bit heavy – they can change and the benefits depend on your personal circumstances. We can give advice on how to make the most of your tax allowances, but if you need complex tax calculations you should speak to a tax specialist.
This article and guides aren’t personal advice. If you are unsure whether an investment or course of action is right for you seek advice.
Find out more about tax planning
The marriage allowance
Married couples and civil partners may be able to transfer some of their income tax personal allowance to their spouse.
If you earn less than the £12,570 personal allowance and your spouse is a basic rate taxpayer, you can gift £1,260 of your allowance. This could save them 20% tax on that £1,260. A potential saving of up to £252.
Better still, you can backdate this saving four tax years, so they could keep even more in their pocket.
Inheritance tax (IHT) planning
This next tip could help the ones you love, while also reducing your inheritance tax bill.
IHT is normally charged at 40% on the value of your estate over £500,000 (£1 million per couple). That includes an allowance of up to £175,000 each when you pass your main residence to a direct descendant. If your estate is worth more than this, it could be worth considering starting to give away some of your money now.
As you both have gifting allowances, your partner can help too. You can each give away up to £3,000 per year, as well as an unlimited number of small gifts up to £250 to each person provided you haven’t already given any other gifts to the same person during the same tax year. You can also gift any of your unused annual gifting allowance from the previous tax year so you might even be able to pass on more.
Although, there always seems to be a “but” with tax rules. In this case, it’s the seven-year rule. You normally don’t have to pay IHT on gifts that don’t fall within one of the exemptions (including those exemptions covered above), as long as you live for more than seven years after making the gift.
Tactical ISA and pension contributions
It wouldn’t be a tax article if we didn’t talk about ISA and pension allowances. Although they might not be right for everyone, these are usually the most popular tools to help save on UK income tax and capital gains tax.
UK adults each have an annual ISA allowance of £20,000 (for the 2023/24 tax year), which is pretty generous for most people. Even if you’ve used your full allowance, don’t forget to make sure your partner uses theirs if they can and it’s right for their circumstances. If you choose to hold investments, it’s important to remember they will fall as well as rise in value, so you could get back less than you invest.
For most people the maximum amount you can add to pensions each tax year before incurring a tax charge is £60,000. Unfortunately, you can’t share each other’s pension allowance. But you can look at which tax brackets you both fall into and work out how much each of you could contribute to reduce tax within your means.
How much can you pay into a pension
Individually, you might also be able to carry forward any unused pension allowance from the previous three tax years.
Remember, money in a pension cannot normally be accessed until age 55 (57 from 2028).
If you want to take advantage of these rules, you might want to become well acquainted with some of our interactive calculators first. This will help you check how you could benefit and the amounts involved. Or you can ask a financial adviser or a tax specialist to do the calculations for you.
An easy way to save tax - get an expert to help
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