One way of saving additional income tax is by asset sharing. If you are either married or in a civil partnership and own a joint asset, and if either partner is a higher rate tax payer, you may be able to save tax if either of your personal allowances are not fully utilised via our asset sharing plan.
If an asset, such as your property, is owned in your sole name, you can use the plan to give your spouse or civil partner a share in the property without a formal transfer of the asset or alteration of the deeds at the .
It works by altering the balance of ownership from equal shares (50:50) to a different ratio (e.g. 75:25, 99:1 or even 100:0). Alternatively, you can change an asset in your sole name to joint ownership. The advantage of this is that you can alter the ratio of joint ownership in order to give your partner a share in an asset for income tax purposes.
By the same token if you are considering selling an asset, you can use the plan to give your spouse/civil partner a share in joint property allowing you to use their capital gains tax annual allowance and save up to £1,818 capital gains tax.
As an example, Mr and Mrs Smith own an investment property from which they receive rent of £10,000 p.a. Mr Smith is a 40% rate tax payer and Mrs Smith is a basic rate tax payer. Mr Smith pays income tax on the rental income of £2,000 p.a. (40% of £5,000) and Mrs Smith £1,000 (20% of £5,000). Using our asset sharing plan Mr and Mrs Smith can save £1,000 p.a. income tax.