Tax is becoming is less complicated for singles than couples, so here are a few issues spouses or civil partnerships need to consider.
First is the legal definition of a couple for tax.
Under tax rules a couple are two people who are married or in a civil partnership living together.
Some tax problems then arise if the relationship breaks down and the separation date is then a key date for some taxes.
Proof of separation is generally a deed drafted by a lawyer or court papers.
So what taxes do couples need to think about when completing their tax returns?
Higher income child benefit charge
If one partner is earning more than £50,000 and the family receives child benefit, this charge can be made by HM Revenue & Customs (HMRC).
The tax man has an online tool for helping calculate if any high income child benefit charge is due, and if so how much.
Marriage allowance
Every little helps, and this allowance really is small for couples where one partner is a higher rate taxpayer.
Applying the marriage allowance allows a partner earning less than the personal income tax threshold to transfer 10% of their allowance to a higher earning partner – giving a generous £4 a week tax saving in the 2015-16 tax year.
Couples with one partner born before April 6, 1935 qualify for the more generous married couple’s allowance
Capital Gains Tax
The rule is couples can switch about ownership of their assets how they like to minimise their tax bills – but if they separate or do not live together this complicates the rules. Generally, the no gain/no loss transfer rule only applies to the end of the year of separation.
Inheritance tax
Complicated? It gets more so when inheritance tax is introduced into the mix as different rules defining separation and living together apply.
Do not forget the new main residence relief that comes in from April 6, 2017, which increases the nil rate band by an additional £175,000 for each partner.
This quick guide merely glosses over the rules about taxing couples. Other issues like becoming expats and who lives in the family home and when ownership is transferred can also mean the difference between a hefty tax bill and paying none at all.
