Last updated: 16 October 2026
The question
I pay income tax at 40%, but my wife and child have no income. If I buy fixed-income bonds in their names, will the interest be tax-free because it is covered by their allowances?
Buying in your spouse’s name
Gifts between spouses and civil partners are free of capital gains tax and inheritance tax. If you give your wife the money outright and she buys the bonds in her own name, the interest is her income. With no other income, she can receive interest tax-free using:
| Allowance | Amount in 2026/27 |
| Personal allowance | £12,570 |
| Starting rate for savings | Up to £5,000 at 0% |
| Personal Savings Allowance (basic rate) | £1,000 |
So she could receive up to £18,570 of interest tax-free if she has no other income. The gift must be genuine: the money must belong to her with no strings attached. If you keep control or the right to the income, the settlements rules can tax the interest on you.
Buying in your child’s name
Gifts from a parent to a minor child are treated differently. If the income from money a parent gives to their unmarried child under 18 is more than £100 a year, the whole amount is taxed on the parent. This is the “parental settlement” rule. Each parent has a separate £100 limit per child.
Example
Rob gives his wife £50,000, which she invests in a bond paying 4.5%, earning £2,250 a year. She has no other income, so the interest is tax-free. Rob saves £900 a year in tax compared with holding the bond himself. If Rob had invested £50,000 in his 10-year-old daughter’s name, the £2,250 would be taxed on Rob at 40%, as it is over £100.
Exceptions for children
- Junior ISAs: up to £9,000 a year, interest and gains tax-free, and not caught by the £100 rule.
- Child Trust Funds: same treatment as Junior ISAs.
- Gifts from grandparents and other relatives: income is the child’s own, and can be covered by the child’s personal allowance.
- Premium Bonds: prizes are tax-free.
Inheritance tax
Gifts to your spouse are exempt. Gifts to children are potentially exempt transfers, free of IHT if you survive seven years, and the annual £3,000 exemption can cover part of them.
Points to consider
- Once given, the money is legally your spouse’s or child’s.
- From age 18, a child has full control of money in their name.
- From April 2027 savings income tax rates are due to rise to 22%, 42% and 47%, which makes using a spouse’s allowances more valuable.
Records to keep
Keep a short note or deed of gift, and bank records showing the money moved into your spouse’s own account before the bond was bought. This helps show that the gift was outright if HMRC ever asks who the income really belongs to.
Frequently asked questions
Can I put the bond in joint names?
Joint interest is usually split 50:50 for married couples unless you elect for actual shares with Form 17.
Does the £100 rule apply to step-children?
Yes, it applies to step-children.
Do I need to tell HMRC about the gift?
No, but keep records showing the money was given.
Can grandparents’ gifts be tax-free for the child?
Yes, the income belongs to the child, so the £100 rule does not apply.
Related: children’s savings interest tax, tax on savings for higher rate taxpayers and shares for a spouse.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with family tax planning. See our personal tax 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 16 October 2026. It is not personal advice, so speak to an accountant about your own situation.
