Husband and wife / civil partners

By Tolley

The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Husband and wife / civil partners
  • Background to the taxation of spouses and civil partners
  • Remuneration paid to spouse
  • Company cars and benefits
  • Transfers of income producing assets
  • The settlement provisions

Background to the taxation of spouses and civil partners

‘Independent taxation’ means that husbands and wives, and civil partners, are treated as independent from one another in respect of:

  • income tax bands
  • personal allowances
  • making and filing tax returns
  • payment of income tax, and
  • tax reliefs

Independent taxation has applied to married persons since 1990/91. Since 5 December 2005, the tax treatment of members of civil partnerships has been aligned with that of married couples in all respects. In this note, the term ‘spouse’ is used to refer to a husband, wife or civil partner.

An additional income tax personal allowance, ‘Married Couple’s Allowance’, is only available for a married couple or a couple in a civil partnership where at least one spouse was born before 6 April 1935. This is covered in the Married couple’s allowance guidance note in the Personal Tax module (subscription sensitive).

From 6 April 2015, an individual can transfer 10% of his or her personal allowance (£1,150 in 2017/18) to his or her spouse / civil partner. The transferee then receives a tax reduction of 20% of the amount transferred. In order to make the transfer, both parties must not be higher rate or additional rate taxpayers. Therefore, this is only likely to be of benefit where one of the couple is not able to utilise the full personal allowance.

ITA 2007, ss 55A–55E

This guidance considers a number of potential tax savings ideas and potential pitfalls in relation to spouses of owner-managers.

Remuneration paid to spouse

It makes sense to pay sufficient remuneration to family members to utilise their personal allowances and basic rate tax bands.

As with all expenditure, remuneration paid to a

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