Posted on: 17/11/2021

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For spouses and civil partners, income from jointly held assets is normally shared equally for income tax purposes.

For spouses and civil partners, income from jointly held assets is normally shared equally for income tax purposes, even if actual ownership differs. This can be quite advantageous where spouses pay tax at different rates.

A spouse with a lower tax rate could be given, for example, a 5% share of rental property, and 50% of the property income would then be taxed at their lower tax rate. The saving can be quite worthwhile where one partner pays at the additional rate and the other only at basic rate.

There are several non-tax factors to consider before transferring ownership of assets, however, so professional advice is recommended.

Relevant property might include land and buildings, savings accounts, certain shareholdings and intellectual property, but not income from furnished holiday lets, close company shareholdings or property held as beneficial joint tenants.

Declaration of beneficial interests

There are some instances when a couple will want to be taxed on their actual interests. This will be the case if a lower tax rate spouse owns more than 50%. The 50% deeming rule can be overridden by making a declaration of beneficial interests and sending this to HMRC, along with evidence of the actual ownership split. A declaration continues for subsequent tax years but cannot be backdated.

CGT and IHT

There is less scope for tax planning when it comes to capital gains tax and inheritance tax because the actual share of ownership is always used.