Tx notes fa22 Final

2. Married Couples / Civil Partners 
In Section 7 of Chapter 2 dealing with income producing assets owned jointly by spouse or civil 
partners, we illustrated the tax advantage to be gained from transferring ownership of an income 
producing asset, such as a rental property from a higher rate taxpayer to a spouse who was only a 
basic rate taxpayer, or even greater tax savings to be had when the transferee spouse was not even 
a basic rate taxpayer and was not therefore using some or all of their personal allowance. This would 
allow income that would have been taxed at 40% to now be taxed at 20% or indeed not taxed at all 
if the income fell within the available personal allowance of the transferee spouse.

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The transferor spouse could transfer the entire ownership of the asset to the transferee spouse such 
that all future income would be taxed in the computation of the transferee spouse, or could transfer 
any part interest in the asset to make it jointly owned which would mean that the income would then 
be split 50:50 between the spouses.
In dealing with CGT and IHT we have since discovered that the transfer of ownership of the asset will 
also be achieved without any capital taxes implications. A transfer of a chargeable asset between 
spouses / civil partners will for CGT purposes be a no gain no loss transfer and will be an exempt 
transfer for IHT purposes.
We also saw when dealing with CGT and spouses that assets would be transferred between them on 
a no gain no loss basis prior to sale to the outside world, in order to utilise the AEA of each spouse 
and to ensure that any taxable gains would then arise upon the basic rate taxpayer spouse rather 
than the higher rate taxpayer spouse to ensure that the lowest available tax rate would then apply to 
their taxable gains.
The introduction of nil rate bands for savings income and dividend income has also created 
opportunities for spouses to reduce their overall charge to income tax and may even give an 
advantage to transferring such income from a basic rate taxpayer spouse to a higher rate taxpayer 
spouse!

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