Splitting assets between married couples

Careful allocation of income and assets between couples can result in significant tax savings.

Married couples are taxed separately on jointly held assets. If you have a joint savings account, you will each pay tax on half the interest earned from this. If one spouse is basic rate or a non-tax payer and the other pays tax at the higher rates, then transferring the whole of the account to the lower earning individual reduces the tax you pay overall.

Care should be taken over the Financial Services Compensation Scheme. If a bank collapses the scheme refunds up to £75,000 of your savings. If savings are held on a joint basis, up to £150,000 would be refunded, but if the account was held in a single name only £75,000 would be returned. If your savings are in excess of £75,000 you should consider splitting them between different banks.

Review the distribution of your assets each year to make maximum use of tax reliefs.

If you give someone as asset you usually have to pay CGT on the profit you would have made, had the asset been sold rather than given away. However, this rule does not apply to gifts between spouses. An asset that produces income, such as a share portfolio or a rental property, can therefore be owned by a lower earning spouse for Income Tax purposes and transferred into joint ownership before sale. Everyone has an annual tax-free capital gains allowance; spouses can both use their allowance against gains, effectively doubling the tax-free amount that can be realised.

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