Transferring income-producing assets – married tax planning

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It’s not unusual for one spouse to earn more than another, there are ways to make full use of each others personal allowances and lower tax bands. With the right planning, it is possible to make use of the other party’s personal allowances and lower tax bands.

Property income

The default position as a married couple, even if you held the property before the marriage, is that income from the property is split equally, regardless of the actual entitlement.

However, instead of holding property jointly, it is possible to be taxed on a different amount, by changing the ‘beneficial’ interest in the property for example. For example, a wife may transfer a property into her and her husbands names, whilst retaining a 95% beneficial interest in the property. Without the correct paperwork, this means that the income will be split 50:50 for tax purposes, however if you wanted to benefit from unequal beneficial interests in the property, then you can make a declaration (using HMRC Form 17) to be taxed on the basis of this new split ‘their unequal beneficial interests’.

However if you wanted to benefit from unequal beneficial interests in the property, then you can make a declaration (using HMRC Form 17) to be taxed on the basis of their unequal beneficial interests.

Shares

Gifts can be made at a Nil Gain, Nil Loss for a transfer of assets between spouses. So you could look to transfer investments that earn an income to your spouse. They are treated as if your spouse had bought the shares at time you had, so there can be loss relief available on shares too.

If you have a company, an option could be to gift shares to your spouse, so that they could be entitled to dividends from your company in the future.

Want to understand the tax implications of this further and explore some opportunities get in touch with our Bev. Care does need to be taken to not fall foul of the settlements legislation which then means it will be taxed on the donor despite the transfer.

Warning: We don’t want to be a kill joy here, but one marriage in three ends in divorce, therefore permanent loss of property to your spouse can occur if this planning is completed and a divorce does happen in the future.

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