How Marriage Affects Property Taxes: Implications and Benefits

In the UK, married couples receive special tax treatment, and as a result, understanding these rules can give newlyweds a head start in building a stable financial foundation for the future.

For example, when it comes to income tax on rental properties, some of you may be aware that if a married couple jointly owns a rental property, they can split the income from this property between themselves and utilise each of their annual personal allowances against this income. This can lead to significant tax savings for couples who are trying to reduce the risk of higher rates of tax.

The majority of couples who purchase, or own rental properties together own them as ‘joint tenant’ owners. This means that both individuals in the couple own an equal share of the property, and as a result, the income is split equally between the owners. This also allows the owners a ‘right of survivorship’ which means that if one of the owners unfortunately passes away, the other owner automatically receives full ownership of the property.

Alternatively, another method is that a married couple holds non-equal shares in a property as ‘tenants in common’. In that case, you can make a declaration to HMRC to allow you to each receive and pay taxes based on the percentage of the property you each own. This means that if you are a higher rate taxpayer, and your spouse is a basic rate taxpayer, you can purchase a property together with your spouse owning 99% of the property, with the remaining 1% allocated to you. This can mean that 99% of the property’s taxable income will be taxed at the basic rate, with 1% taxed at the higher rate.

Another important benefit for married couples is that there is no capital gains tax charge on the transfer of property between spouses/civil partners. This is done on a ‘no gain, no loss’ basis meaning that there is no charge on the transfer to a spouse, but any gain or loss is carried forward to when the property is disposed of.

Finally, although it is a sad topic, inheritance tax planning is vitally important to all married couples. In such a tragic situation, it is more important than ever to make sure that loved ones are taken care of, and one benefit for married couples is that a legacy left from one spouse to another is generally free of inheritance tax.

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