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Updated on 6 April 2024

Joint income from savings

If you have joint savings (or shares), make sure you understand how the income is split between you for tax purposes.

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Joint accounts with a spouse or civil partner

Members of a married couple or a civil partnership are taxed separately. This means each spouse or partner is potentially entitled to a personal allowance, the starting rate for savings, a personal savings allowance, dividend allowance, etc.

If you have savings (or shares) held in joint names between you and your spouse or civil partner, by default, 50% of the interest (or dividend income) arising is treated as taxable on you and the other 50% is taxable on your spouse or civil partner. This is the case even if the underlying beneficial entitlement is unequal (for example, if only one spouse or civil partner funds the savings account or purchases the shares).

However, you may both elect, on form 17, to be taxed in line with your respective beneficial interests instead, if these are unequal. Once you have made the joint election, it is permanent unless there is a change of beneficial interest in the account or you separate as a couple – you cannot simply choose to go back to being taxed 50:50 on that account.

The election only takes effect from the date it is signed and cannot be backdated. It must reach HMRC within 60 days of being signed and dated by both account holders. If the form does not reach HMRC within 60 days, then it is invalid and a fresh election will need to be made.

Other joint accounts

By contrast, note that joint owners of property (such as a joint bank account or jointly-held shares) who are not married or in a civil partnership, are taxed on the share to which they are entitled. In most cases this will be 50:50, even if contributions to the account are unequal.

Transferring investments to your partner

To take best advantage of being taxed separately, it may be sensible, for tax purposes, to transfer savings (or shares) to your partner. This can save tax on the interest or dividends if you are part of a couple where one person has spare capacity in their allowances or is in a lower tax band than the other.

You will need to bear in mind, however, that transferring legal ownership of property to your spouse or civil partner might have other impacts – for example, the revised ownership might be taken into account on a separation or divorce. If you are concerned about these other impacts, you should take legal advice.

Also, if you transfer shares to your partner, this is a disposal for capital gains tax purposes. If you are not married or in a civil partnership when the shares are transferred, there may be capital gains tax to pay on the transfer.

However, there will be no capital gains tax to pay if you are transferring (that is, gifting) a cash balance in pounds sterling, whether or not you are married or in a civil partnership.

There could also be inheritance tax implications. 

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