The effect of marriage or civil partnership — overview

Spouses and civil partners are taxed independently on their own income, earned and unearned, and any gains. Civil partners are treated in the same way as married couples for tax purposes. Exceptions to the general principles apply to couples who were married before 5 December 2005 and who were born before 6 April 1935.

Income from assets where the legal title is in joint names shall be deemed for tax purposes to belong to the parties equally (with certain exceptions, such as dividends from jointly owned shares in close companies) regardless of whether that is the case. Where, in reality, the asset is owned beneficially in unequal shares, spouses or civil partners may declare the true beneficial ownership and will be taxed accordingly. This declaration cannot be used as a means of trying to achieve maximum tax efficiency as the declaration must reflect the actual beneficial ownership. There is no obligation to make such a declaration: even if the spouses/civil partners beneficially own a jointly owned asset in unequal shares, they can continue to be taxed on half of the income each if they wish.

Spouses and civil partners have the ability to transfer certain assets free of CGT. This may be of considerable importance in tax planning during the year of separation. It also enables efficient tax planning for them in the course of the marriage/civil partnership, making the best use of individual losses.