How to Maximise Allowances Between Spouses in 2025/26
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Tax Planning for Couples: How to Maximise Allowances Between Spouses in 2025/26

With income tax thresholds frozen again in 2025/26 and personal allowances continuing to lose real value, many couples are finding themselves paying more tax than necessary — simply because income or assets aren’t being shared in the most efficient way.

If you’re married or in a civil partnership, the tax system still offers a number of planning opportunities — but they need to be used proactively. From income shifting and dividend planning to CGT and IHT allowances, there are several ways to legally reduce your family’s overall tax bill.

This guide outlines how to structure your affairs to make the most of available allowances, and what you can still do before 5 April 2026 to stay efficient.

1. Marriage Allowance (2025/26): Transfer Unused Allowance

The Marriage Allowance lets a lower-earning spouse transfer part of their personal allowance to their higher-earning partner — potentially saving up to £252 in tax.

Key rules:

  • You must be married or in a civil partnership
  • The lower earner must have income below the personal allowance (£12,570)
  • The higher earner must be a basic rate taxpayer (income up to £50,270)
  • You cannot both be higher rate taxpayers

In 2025/26, the lower earner can transfer £1,260 of their allowance to their spouse, giving a tax saving of 20% x £1,260 = £252.

This can also be claimed retrospectively for up to 4 years, so if you’re eligible and haven’t claimed it before, you may be due a refund of up to £1,256.

2. Income Shifting: Use Both Personal Allowances

If one spouse pays tax at a higher rate and the other pays none or basic rate, moving income-producing assets into joint names (or into the lower earner’s sole name) can reduce tax on:

  • Rental income
  • Dividends from company shares
  • Interest on savings or loans

Example:

You’re a higher rate taxpayer earning £60,000. Your spouse earns £10,000. You own a rental property generating £12,000 profit a year.

If the property is held in your name alone, the full £12,000 is taxed at 40%. If you transfer 100% beneficial ownership to your spouse, they can use their personal allowance, basic rate band, and property allowance — potentially paying no tax at all.

This must be properly documented (often with a Form 17 and a declaration of beneficial interest if jointly owned). Legal and tax advice should be taken before transferring property or assets.

3. Dividend Planning in Family Companies

If you run a limited company, and your spouse is a shareholder, you can use two sets of dividend allowances and basic rate bands.

The dividend allowance in 2025/26 is just £500 per person — down from £1,000 last year — so splitting shares is more important than ever.

Example:

You hold all the shares and want to pay a £10,000 dividend. If you’re already over the basic rate band, that £10,000 is taxed at 33.75% = £3,375 tax.

If your spouse is a shareholder with no other income, they could receive the £10,000:

  • First £500 at 0%
  • Next £10,070 at 8.75% (basic rate band)
    = £828 total tax — a saving of over £2,500.

Important: This must reflect genuine ownership — you can’t just declare dividends to someone who doesn’t own shares.

We can help structure the shareholding and minute any changes properly.

4. Capital Gains Tax: Use Two Annual Exemptions

In 2025/26, the Capital Gains Tax (CGT) annual exempt amount is:

  • £3,000 per person
  • Applies to sales of shares, property, crypto, and other chargeable assets

For married couples, this means £6,000 per year tax-free — but only if both individuals own the asset.

CGT planning between spouses is particularly important when:

  • Selling second homes or buy-to-let properties
  • Realising gains on shares
  • Crystallising gains before the CGT rate or exemption changes

Example:

You want to sell a rental property held solely in your name with a £50,000 gain. Before the sale, you gift 50% to your spouse (no CGT or SDLT applies between spouses), so the gain is split £25,000 each. This allows you to use two CGT exemptions, and potentially keep more of the gain in the basic rate band (where CGT is 18% rather than 24%).

5. Inheritance Tax (IHT): Planning Between Spouses

Married couples benefit from important IHT advantages:

  • Assets passed between spouses are generally exempt from IHT, regardless of value
  • Each spouse has a £325,000 nil-rate band, plus a £175,000 residence nil-rate band (if passing the family home to direct descendants)
  • Unused bands are transferable on death — potentially allowing up to £1 million of assets to pass tax-free to children

To use this fully, the estate must be structured correctly, particularly where:

  • One spouse has non-UK domicile
  • There are children from previous relationships
  • The estate includes business or agricultural property

Advance planning is essential. You can also use gifts between spouses, or gifts out of surplus income, to reduce IHT exposure during your lifetime.

6. Self Assessment: When Both Partners Must Register

If income is being shared or gifted between spouses, HMRC may expect both parties to file tax returns.

You must register for Self Assessment if you:

  • Receive dividends above £500
  • Earn rental income over £1,000
  • Make capital gains above £3,000
  • Have other untaxed income

It’s not automatic that both partners will be registered — so check whether returns are needed after transferring income or assets.

We can register your spouse and prepare both returns to ensure all income is correctly reported.

7. Pensions and Marriage: Planning Together

Pensions remain one of the most tax-efficient ways to build long-term wealth — and couples can plan strategically across both pension pots.

Consider:

  • Using unused pension annual allowances via carry forward
  • Ensuring both spouses contribute enough to receive basic rate relief
  • Reducing adjusted income below £100,000 to protect the personal allowance
  • Passing on pension wealth outside the estate for IHT purposes

A non-earning spouse can still contribute up to £3,600 gross per year and receive tax relief. This can be paid by the other spouse or the company.

Final Thoughts

With more allowances being cut or frozen in 2025/26, family-level tax planning is more important than ever. Many couples pay more tax than they need to simply because they’ve not shared income or assets in the right proportions — or haven’t used both sets of exemptions and bands.

Whether you’re structuring rental income, managing capital gains, or planning for retirement, Merranti can help you build a tax strategy that works across both spouses — fully HMRC-compliant, legally sound, and tailored to your goals.

Want to optimise your household tax position?
Book a Couples Tax Planning Review with Merranti and make sure you’re using every allowance available before 5 April 2026.

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