This is because bank interest is automatically paid net of 20% income tax (you probably don’t notice this!!) Your bank assumes that everyone is a basic rate or higher rate income tax payer so have therefore used up their income tax free personal allowance (currently £7,475 pa for those under 65).
But, a non-income tax payer still has an unused personal allowance so they can inform the bank of this and receive interest tax-free! (up to the value of their personal allowance each year). Your spouse simply needs to complete an R85 form, available from the HMRC website, and give it to her bank. (Bear in mind that your spouse would legally have sole control of the money as the account is in her name - but if you're happily married....)
So if you are a basic rate tax payer with a large amount of savings, this could save you up to £1,495 year …………or £2,990 if you are a 40% rate income tax payer...or a massive £3,737 if you are a 50% rate income tax payer!
KERRRCHING!!!
(obviously if you are a non-income tax payer yourself then make sure you don't pay tax on the interest on your bank account by filling in an R85 form as well)
