Putting savings in a lower-earning partner’s name is a legitimate and straightforward way to reduce your household tax bill on savings interest — HMRC allows it, provided the transfer is genuine. Here is how to do it correctly and how much you can save in 2026/27.
Personal Savings Allowance 2026/27
| Taxpayer type | Annual income | Personal Savings Allowance |
|---|---|---|
| Basic rate | Up to £50,270 | £1,000 |
| Higher rate | £50,271–£125,140 | £500 |
| Additional rate | Over £125,140 | £0 |
The PSA applies to interest from bank accounts, building society accounts, NS&I accounts (excluding Premium Bond prizes, which are always tax-free), and peer-to-peer lending. It does not apply to ISA interest, which is always tax-free.
The Tax Saving from Transferring Savings
Example: David earns £70,000 (higher rate) and his wife Helen earns £28,000 (basic rate). They have £100,000 in savings earning 4.5% interest = £4,500/year.
Scenario A — All savings in David’s name:
- David’s PSA: £500
- Taxable interest: £4,500 − £500 = £4,000
- Tax at 40%: £1,600
Scenario B — All savings transferred to Helen:
- Helen’s PSA: £1,000
- Taxable interest: £4,500 − £1,000 = £3,500
- Tax at 20%: £700
Annual saving: £900
This saving compounds year after year as long as the savings remain in Helen’s name and rates stay similar.
Key Figures 2026/27
| Amount | |
|---|---|
| Personal allowance | £12,570 |
| Basic rate threshold | £50,270 |
| Higher rate threshold | £125,140 |
| PSA — basic rate taxpayer | £1,000 |
| PSA — higher rate taxpayer | £500 |
| PSA — additional rate taxpayer | £0 |
| Starting rate for savings (low earners) | 0% on up to £5,000 |
| ISA allowance (always tax-free) | £20,000 |
The Starting Rate for Savings: An Extra Allowance for Low Earners
If your partner has little or no income other than savings interest, they may also benefit from the starting rate for savings — a 0% tax band of up to £5,000 that applies before Income Tax kicks in on savings, for people whose non-savings income is below £17,570.
For a partner with no employment income and only savings interest, the effective tax-free savings band is:
- Personal allowance: £12,570
- Starting rate for savings: £5,000
- Personal Savings Allowance: £1,000
- Total tax-free savings interest: £18,570
This is a significant allowance. If you have a non-working partner, concentrating savings in their name is extremely tax-efficient.
How to Transfer Savings Correctly
For the transfer to be effective for tax purposes:
- Make the transfer unconditional — give the money outright. Do not retain access or control.
- Do not retain the income — the interest must genuinely go to your partner, not back into your account.
- Update account ownership — open accounts in your partner’s sole name, or convert joint accounts.
- No repayment arrangement — the transfer cannot be a loan disguised as a gift.
A simple bank transfer of savings to a sole account in your partner’s name, which they then manage and benefit from, is perfectly legitimate.
Joint Accounts: A Simpler but Less Efficient Option
Interest on a jointly held account is normally split 50:50 for tax purposes (Form 17 can be used to declare a different split for married couples if the underlying ownership differs). If you are a higher rate taxpayer and your partner is a basic rate taxpayer, a joint account gives you half the tax advantage of a full transfer — only 50% of the interest is attributed to the lower-rate partner.
For maximum efficiency, a sole account in the lower-earning partner’s name is better than a joint account.
What HMRC Looks For: The Anti-Avoidance Rules
HMRC’s settlement legislation (s.625 ITTOIA 2005) can apply if:
- The transfer is conditional or reversible
- The original owner retains a benefit from the transferred funds
- The arrangement is structured to retain practical control while attributing income elsewhere
For a straightforward outright transfer of cash savings to a spouse or civil partner, these rules do not apply. The position is clear in HMRC’s own guidance: an outright gift of cash between spouses is not a settlement.
ISA Transfers vs Savings Transfers
One tax-efficient alternative to moving savings is to maximise ISA contributions — interest inside an ISA is always tax-free for both partners. Each partner has a £20,000 ISA allowance per year. Building up ISA savings eliminates the PSA issue entirely.
For couples with large savings outside ISAs, a combination of:
- Moving taxable savings to the lower-rate partner
- Using the ISA allowance each year going forward
…is the most tax-efficient long-term strategy.
See our ISA allowance guide, income tax rates guide, and transfer assets to spouse CGT guide.