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Simon Howley tackles tax planning within the family

From a tax perspective, marriage is not what it used to be, as it does not provide much scope for income tax planning.

However, married couples should ensure that they use up their personal allowances and basic rate tax band as best they can. As the personal allowance is not transferable, this is going to involve transferring assets from husband to wife (or vice versa) or assets being put into joint names.

It is very important that assets gifted between spouses are outright gifts. This means that the gift cannot be subject to any conditions, otherwise you run the risk of triggering the anti-avoidance rules.

However, HMRC has stated the following:

“Merely putting an account or other assets into the name of a husband or wife is not sufficient to create an outright gift. If the person named is holding the asset as nominee for the original owner, or there are some restrictions, the gift will not be outright”

What if the husband transfers income-producing assets to his wife, and she pays this income into a joint bank account?

HMRC further state:

“So long as the gift by the husband was an outright gift, made without conditions or restrictions of any kind…the mandated income will be the wifes for tax purpose.”

So it is more important than ever to ensure that any gifts between spouses are documented correctly. You need to be able to demonstrate to HMRC that:

  • it is an outright gift:

  • with no restrictions; and

  • that you cannot and do not receive any future benefit.

We are more than happy to discuss your options on this or any other tax related matter. Just get in touch.