HMRC has clarified the tax rules for couples with personal savings accounts, stating that transferring money between individual accounts is treated as an outright, tax-free gift. The tax authority responded to a social media query from a married couple where one spouse earns and the other does not, asking how to determine whose income the interest is for tax purposes.
Tax responsibility and gift rule
HMRC told the customer: "When you move money between individual bank accounts, the person who legally owns the account is responsible for the tax on the interest earned." The group added: "Because these are personal savings accounts and not joint accounts, HMRC treats the transfer of funds as an outright, tax-free gift."
Tax allowances for savers
Each person can earn a certain amount of interest from their savings each tax year on an individual basis. Interest earnings in a joint account are split 50/50 between the two people named on the account.
These are the allowances you get: Basic rate taxpayers - £1,000; Higher rate taxpayers - £500; Additional rate taxpayers - zero allowance. People on a relatively low income may also benefit from the starting rate for savings, an extra £5,000 of interest you can earn tax-free. But once your income moves above the personal allowance threshold of £12,570, you lose £1 of this allowance for each £1 you earn above this level. So once your income reaches £17,570, you have no starting rate.
Savings changes
Another way to build your savings tax-free is with ISAs. These are tax-free savings vehicles, where any growth within these accounts is entirely tax free. You can deposit funds into a cash ISA, similar to a cash savings account, or you can purchase investments through a stocks and shares ISA.
Currently, you can deposit up to £20,000 a year into ISAs, and split this allowance however you want between any type of ISA. But from the April 2027 tax year, this is being changed. Under the new rules, you will only be able to put away up to £12,000 however you want, while the remaining £8,000 allowance will only be available to put into stocks and shares. People aged 65 and over will be spared from the restricted ISA allowance and will keep the current full £20,000 allowance.
