Martin Lewis Urges Married Couples to Leverage Key Tax Rule for Savings
Financial guru Martin Lewis is calling on married couples and civil partners with around £11,500 in savings to take advantage of a crucial tax-efficient strategy. Speaking on his ITV programme, the MoneySavingExpert.com founder highlighted how legally transferring funds between spouses can optimize tax allowances and reduce liabilities.
How the Tax-Saving Rule Works for Couples
Lewis explained that this specific rule is designed to benefit married couples and civil partnerships by allowing tax-free transfers of assets. The goal is to maximize tax-free allowances and minimize the tax rates paid, particularly on savings interest.
He detailed the Personal Savings Allowance, where basic-rate taxpayers can earn £1,000 in savings interest tax-free annually, while higher-rate taxpayers have a £500 allowance. To illustrate, Lewis provided an example:
- Val is a 40% taxpayer with £1,500 in annual savings interest. With a £500 allowance, she pays £400 tax on the remaining £1,000.
- Tine is a 20% taxpayer with £500 in annual interest, using none of her £1,000 allowance, so she pays no tax.
By moving some savings from Val to Tine in a trusted relationship:
- Val's interest drops to £500, fully covered by her £500 allowance, eliminating her £400 tax bill.
- Tine's interest rises to £1,500, with £1,000 tax-free and £500 taxed at 20%, costing £100.
This reduces their combined tax from £400 to just £100, saving £300 annually through a simple transfer.
Beyond Savings: Broader Applications of the Rule
Lewis emphasized that this rule extends beyond savings to other financial areas. For dividends from shares, individuals have a £500 annual tax-free allowance, while capital gains offer a £3,000 yearly exemption on profits.
He noted, "If you're selling a business in your name, you could give half to your spouse beforehand, allowing both to use your £3,000 allowances each." This strategy maximizes tax benefits across various assets.
Additionally, couples can utilize Individual Savings Accounts (ISAs) for cash or investments to further enhance tax efficiency. Lewis stressed that this approach is deliberate, intended as a benefit for married couples and civil partners to manage their finances more effectively.
By strategically placing money between partners, couples can significantly reduce their tax burden, making it a smart financial move for those with savings or other assets.
