We are celebrating this festive time of year with a Christmas Selection Box of different tax reliefs and exemptions. As it is the time for giving and sharing, we hope that our "Box" will save you pounds rather than adding them!

C-H-R-I-S-T-M-A-S

M is for the Marriage Allowance (or transferable married couples allowance) and other spouse exemptions

  • From 6 April 2015 a spouse or civil partner who is not liable to income tax above the basic rate may transfer up to 10% (£1,250 for 2019/20) of their unused personal allowance to their spouse/civil partner.
    • You cannot choose to transfer a lower amount to your spouse/civil partner, it has to be the maximum amount of 10% of your unused personal allowance.
    • The allowance ceases to be available for transfer the year after divorce or the dissolution of a civil partnership. There is no requirement for spouses or civil partners to be living together when transferring/receiving the allowance meaning it can still be transferred after separation. 
    • An election must be made and you have 4 years to make it.
  •  Transfers between spouses are exempt for CGT and IHT purposes.
    • This is restricted for IHT where the transferor spouse is non UK domiciled.
  • There is no such spousal exemption for stamp duty land tax or stamp duty purposes.
  • A married couple has only one main residence between them for the purpose of private residence relief.
  • Spouses and civil partners have a transferable nil rate band for IHT. 
  • For purposes of the statutory residency test to determine whether a person has a family tie for a year, a relevant relationship exists with a spouse or civil partner of the individual (unless separated) and who is UK resident.

Married couples and civil partners: hacks

  • Consider transferring all or part of an asset to your spouse or civil partner prior to sale to utilise their CGT annual exemption and 10/18% tax band if they are not already a higher rate taxpayer and you are.
  • Business owners: consider paying your spouse a wage from the business to utilise their personal allowance and basic rate band.
    • Wages must equal to or be above the current National Minimum Wage (NMW), or National Living Wage (NLW).
    • HMRC challenges the rate of remuneration paid to family members if it considers that the expense is not "wholly and exclusively incurred" for the purposes of the business so ensure that remuneration paid is reasonable for the work undertaken on the “arm's length principle”.

Our selection box so far...

C - H - R - I - S - T - M - A S

Useful subscriber resources:

Married couple v. unmarried couple (taxation of couples)

IHT non domiciled spouses

IHT: transferable nil rate band

Wages: spouse or family

Divorce & separation: toolkit

At a glance:

Marriage Allowance (Transferable married couples allowance)

CGT: Gifts

IHT: Gifts

PRR: Private Residence Relief

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