Last updated: 14 October 2026
Is it right to issue shares to your wife to reduce higher rate tax?
It can be, if it’s done properly. Giving your spouse or civil partner ordinary shares in your company means dividends on those shares are taxed on them, using their Personal Allowance, dividend allowance and basic rate band. HMRC accepts this for genuine outright gifts of ordinary shares with full rights, following the Arctic Systems case. It can challenge arrangements under the settlements rules where the shares are mainly a right to income, such as non-voting shares with only dividend rights, or where you keep control of the income.
What works and what doesn’t
| Arrangement | Likely outcome |
| Gift of ordinary shares with voting, dividend and capital rights | Accepted (spouse exemption from settlements rules) |
| Spouse subscribing for shares with their own money | Accepted |
| Issuing non-voting shares carrying only dividend rights | At risk: may be a settlement taxed on you |
| Waiving dividends so spouse gets more | Risky unless genuine commercial reasons |
| Shares to an unmarried partner | Settlements rules can apply; spouse exemption doesn’t |
| Shares to minor children | Income over £100 a year taxed on the parent |
How much it can save
For 2026/27, dividends are taxed at 10.75% in the basic rate band and 35.75% in the higher rate band, after a £500 allowance. If your spouse has little income, each £10,000 of dividends moved from you to them can save £2,500.
Example
Simon owns 100% of his consultancy company, takes a £12,570 salary and £60,000 in dividends, paying higher rate dividend tax on part of it. His wife Emma, who doesn’t work, receives a gift of 50 ordinary shares. They each take £30,000 in dividends. Emma uses her Personal Allowance and pays 10.75% on most of the rest. The couple saves several thousand pounds a year compared with Simon taking it all.
Other considerations
- Gifts between spouses are free of CGT and IHT
- Emma owns the shares outright; on divorce, they’re part of the assets
- Both shareholders must receive dividends in proportion to their shares unless there are different classes
- Business asset disposal relief requires 5% shares and being an employee or officer for 2 years
Alphabet shares
Different share classes let directors vote different dividends to each class. This adds flexibility but increases the risk of a settlements challenge, so take advice.
Planned changes
Dividend rates rose by 2 percentage points from April 2026. The government has also consulted on income shifting in the past, so keep arrangements under review.
Common mistakes
- Issuing shares with dividend rights only
- Paying dividends to a spouse who never really owned the shares
- Forgetting the company needs a board minute and updated register
- Not updating Companies House at the next confirmation statement
Frequently asked questions
Does my wife need to work in the business?
No, for ordinary shares gifted outright.
Can I give shares to my adult children?
Yes, and their dividends are taxed on them.
Do I need to file anything?
A stock transfer form; stamp duty doesn’t apply to gifts.
Can HMRC look back?
Yes, if arrangements were incorrect.
Related: buying shares or lending to a friend’s company, the best business structure and sharing rental income with a partner.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with shareholder and dividend planning. See our limited company accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
