Should you give shares to your partner to save tax?

Should you give shares to your partner to save tax? When you own your own company it is important that you consider how to extract money out of the company whilst trying to minimise your tax liability.

One way to extract money out of your company is by paying dividends but the tax treatment has changed over the last few years.

By owning your own company jointly with your spouse, rather than owning all the shares in your own name, can possibly save you tax if one of you is paying tax at a higher rate than the other.

Let’s look at an example:

This illustrates the possible tax savings that may be made where shares in a company are owned between a couple instead of by just one of them.


	One shareholder			Joint shareholders
				Spouse1	Spouse2		Total
	£		£	£	£		£

Salary, say	£10,000			£10,000	£0
Dividends	£90,000			£45,000	£45,000

Total income	£100,000			£55,000	£45,000
Less: Tax-free allowances	-£11,850			-£11,850	-£11,850

Chargeable to tax	£88,150			£43,150	£33,150

Tax at dividend nil rate on	£2,000	=	£0	£2,000	£2,000	=	£0
Tax at dividend basic rate on	£32,500	=	£2,438	£32,500	£32,500	=	£4,875
Tax at dividend higher rate on	£53,650	=	£17,436	£8,650	£0	=	£2,811
Tax payable			£19,874				£7,686

Possible tax saving							£12,188

By both of you owning the shares you can each use the tax free allowance, dividend nil rate band and other tax rate bands to bring the overall tax liability down

What is the situation if, when you formed the company you owned all the shares?

Well that should not be a problem because one option is to gift the shares to your spouse which can be done at any time provided they are ordinary shares

So if the possible tax savings are attractive to you then you should contact your accountant to discuss the options available to you.

KW Accounting

Chartered Accountants & Chartered Tax Advisers

Should you give shares to your partner to save tax?

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