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Independent Taxation

  • Spouses are taxed separately after receiving separate allowances according to their individual circumstances.
  • Lenders may double the facility offered to an individual landlord by including a spouse investor.
  • With independent taxation, the other side of this coin is that when a couple let a property via an agent, which both spouses jointly own, they must provide evidence of exemptions or have income tax deducted at source proportional to ownership on the deeds for any spouse not providing exemption.
  • Another anomaly occurs when spouses separately own properties and ask a solicitor to convert them from individual, to joint, ownership.  Whilst this is likely to reduce income tax beware.  The Worthing Tax office is likely to look at CGT implications.  My wife and I discovered this unexpectedly.
    • Ironically, this can give rise to a capital gain for one or both spouses, even though no sale actually occurs.  This is because they have transferred assets, albeit between themselves, and it is this transfer which can create a liability, particularly when the value of the transfer exceeds the CGT threshold (£10,900 in 2013).
    • The amount of CGT payable depends upon whether you are a basic, or higher rate, income tax payer AND the amount of the gain.
    • If your revenue income in 2013 exceeds £32,010 you are a higher rate taxpayer.
    • The CGT rates payable are: 18% or 28% for basic and higher rate taxpayers respectively.
    • Any gift or transfer, as well as sale of non-exempt assets are subject to CGT.
    • Upon death no CGT is payable - instead you pay IHT.
      • The IHT threshold  in 2013 remained at £325,000.

See also

Published: 8 November 2013 Last Updated: 13 January 2022