By David Hodson OBE
1.1 Taxation of spouses
One definition of marriage is the coming together of a man and a woman as "one flesh". For many years Parliament has recognised this special united relationship (and the family unit created as a result) by giving it favourable tax treatment. During marriage, spouses should take maximum advantage of this special treatment to minimise the overall tax payable by them both.
In this Guide I start with a brief summary of the various UK taxes. I then describe how spouses are taxed, and the opportunities available during the marriage to reduce the tax bill of the family. I include the major changes introduced in April 1990 of Independent Taxation. I also mention the taxation of a couple who choose to cohabit rather than marry. Marriage in this context include same-sex marriage
If spouses separate or divorce, they may be able to benefit from certain tax provisions that apply in such circumstances. They can be very valuable indeed and so I describe them in some detail.
In any event, the high rate of divorce in England at present demands that any tax planning measures during marriage should take account of the impact of any divorce and the likely divorce financial settlement.
Particular provisions apply where a tax-payer is either not resident or not domiciled in England and Wales. These detailed provisions are outside the scope of this Guide. It is essential that no admissions are made to the tax authorities about your residence or your domicile until you have first discussed the matter in detail with your advisers. Moreover this Guide does not cover tax payers who may be eligible for reliefs for the elderly, nor cover tax or welfare benefits relevant for those entitled to state benefits. Increasingly some tax reliefs and allowances are linked with the welfare benefits system. This Guide does not deal in detail with such reliefs. For those not on low incomes, these reliefs are still worth claiming.
For ease of reference, I have assumed that it is the husband who is paying the maintenance to his wife, the child lives primarily with the wife, that it is the husband who is the first to leave the matrimonial home, and that it is he who is personally responsible for all its outgoings. In practice this is not necessarily so, but the principles outlined in this Guide nevertheless apply.
Tax reliefs, allowances and exemptions usually change each tax year. The figures in this Guide apply for the tax year 2017/18 as announced in the 2017 Budget and as in the Finance Act 2017. I update the Guide each tax year, so you should make sure you have the latest edition. This Guide is correct as at April 2017 with the changes anticipated following the Budget for the tax year starting 6 April 2017.
This Guide provides general information only. Professional advice should always be taken and I cannot accept any liability for reliance on it. Copyright in this document is with me.