My husband and I have recently retired and are drawing our state and personal pensions. I only have a very small personal pension – which means my income is below the tax allowance – but my husband, who worked in a local authority for many years, has a very good pension. He also has a number of investments that give him additional income and move him into the higher tax bracket. Can he transfer some of his investment and pension income into my name?
Matthew Beck of Smith & Pinching responds:
It sounds to me like you and your husband would benefit from a complete review of your pensions and investments so that you can optimise your combined tax position. It may be, for example, that you could change the way that some of your investments deliver returns so that they grow in value rather than deliver income – if you don’t need all of the income that is currently being generated.
If you do want to retain the income levels you have at the moment, it may well be a good idea to move some of your husband’s investments into your name to reduce his taxable income. However, your husband will not be able to transfer pension income from his name to yours. Pensions are held in the name of the individual and are not transferable in this way.
There are other tax planning measures we might explore. It might be possible for you to transfer some of your personal tax allowances to your husband so that he is able to reduce his tax liabilities. This is known as the Marriage Allowance and allows a non-taxpayer to transfer £1,260 of his or her personal allowance to a basic rate taxpaying spouse or civil partner, increasing the personal allowance of the recipient partner. However, the Marriage Allowance is not available to higher or additional taxpayers, so would only be available to you if your husband is able to somehow reduce his income below the higher rate threshold.
I suggest you take advice from a Chartered Financial Planner to explore all of the planning options available to you to make your combined income as tax-efficient as possible.
Any opinions expressed in this article do not constitute advice. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.
For more information, please visit www.smith-pinching.co.uk
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