How Asset Ownership Between Spouses Can Affect Tax Planning

Following the 2025 Autumn Budget, there has been constant discussion about tax allowances and thresholds. Changes affecting capital gains tax (CGT), inheritance tax (IHT), child benefit and income tax bands have dominated headlines, as households try to understand how evolving tax rules may affect their finances.

Yet one area that often receives far less attention is that, for many couples, these allowances can potentially be increased.

The UK tax system is largely structured around individuals, but married couples and civil partners benefit from the ability to transfer assets between them without triggering capital gains tax or inheritance tax. In practical terms, this allows for planning flexibility.

While the tax system can feel complex, this feature can offer households an  opportunity to structure their finances more efficiently. However, many couples overlook these opportunities or assume their current arrangements are already optimal.

With dividend tax rates expected to rise from April 2026 and property income potentially facing higher taxation from April 2027, reviewing how assets are held within a household is becoming increasingly important.

---

How Tax Influences Long-Term Investment Outcomes

When discussing investments, the focus often falls on gross returns — the performance before tax. However, the tax treatment of income and gains can have an even greater impact on long-term wealth.

Consider a simplified example.

Imagine a £500,000 share portfolio held within a general investment account, generating dividend income of £15,000 per year (3%).

From April 2026, depending on the investor’s tax band, the net income could look very different:

• Basic rate taxpayer: £13,441.25 net (2.69%)
• Higher rate taxpayer: £9,816.25 net (1.96%)
• Additional rate taxpayer: £9,294.25 net (1.86%)

The investment itself has not changed. The gross return remains identical. Yet the after-tax outcome varies significantly depending on who owns the asset.

Over many years, these differences compound. Capital gains tax, dividend tax and inheritance tax are all charged at different rates for different individuals, and the combined effect can produce a substantial divergence in long-term financial outcomes.

For this reason, tax efficiency is often considered alongside investment strategy, rather than as an afterthought.

---

Making the Tax System Work for Your Household

One of the most valuable planning features within the UK tax system is the ability for married couples and civil partners to transfer assets between each other without triggering immediate tax charges.

Unlike transfers to other individuals, moving assets between spouses generally does not create a capital gains tax liability, nor does it trigger inheritance tax.

This flexibility can help  households allocate assets in a way that makes use of both partners’ allowances and tax bands.

For example:

• If one spouse is a higher or additional rate taxpayer while the other remains within the basic rate band, transferring income-producing investments to the lower-rate taxpayer may reduce the household’s overall tax bill.
• Dividend-producing shares, bond funds or buy-to-let property may generate income more efficiently when held by the partner with the lower marginal tax rate.
• Capital gains can potentially be realised in the name of the spouse with unused annual exemptions or lower tax rates.

In addition to income and capital gains tax planning, ownership decisions can also influence exposure to:

• Inheritance tax
• Personal savings allowances
• Dividend allowances
• The High Income Child Benefit Charge
• The tapering of the personal allowance

When these elements are considered together, thoughtful asset allocation between spouses may improve after-tax outcomes without changing the underlying investment strategy.

---

Cashflow Modelling

While the principle of tax-efficient asset ownership may sound straightforward, identifying the optimal structure is rarely simple.

Circumstances evolve over time. Income levels change, tax rules shift, investment values fluctuate and retirement approaches.

One spouse may retire earlier than the other. Pension withdrawals, state pension entitlement and capital gains could interact in ways that are difficult to anticipate without careful planning.

This is where cashflow modelling can be a useful tool..

By projecting income, spending, asset growth and potential tax liabilities across both partners’ lifetimes, financial planners can test different ownership structures and withdrawal strategies before implementing them.

Cashflow modelling allows couples to see:

• The immediate tax impact of ownership changes
• The cumulative effect on long-term wealth
• How different retirement scenarios might unfold
• Whether their financial plan remains sustainable over time

For couples with assets across multiple structures — such as pensions, ISAs, general investment accounts, investment bonds, company shares and property — relatively small adjustments may lead to differences in lifetime after-tax wealth.

Sometimes the question is not simply who should hold an asset, but:

• When income should be drawn
• Which tax wrapper should be used first
• How withdrawals affect each partner’s tax band in a given year

Effective planning therefore treats the household as a single financial unit, while still operating within an individual-based tax system.

---

 Ownership Considerations for Business Owners

For couples where wealth includes business assets, the question of ownership can become even more important.

Many business owners rely on Business Relief (BR) to help reduce exposure to inheritance tax. Qualifying business assets may receive up to 100% relief from IHT, meaning they may fall outside the taxable estate at death.

However, this relief is conditional.

If BR-qualifying shares are sold during the owner’s lifetime, the proceeds typically become cash or other investments that no longer qualify for the relief.

This can create a hidden risk.

A common estate planning structure involves assets passing entirely to the surviving spouse upon the first death, using the spousal exemption to defer inheritance tax.

While this avoids tax initially, it may not preserve business relief in the long term. If the surviving spouse later sells the business, the value may become fully exposed to inheritance tax when they die.

In estates where one spouse holds most of the business assets while the other holds investment portfolios or property, the final inheritance tax outcome can vary significantly depending on:

• Which spouse dies first
• Whether the business is sold
• How long the surviving spouse lives

Focusing only on the first death may not provide a complete view of the overall tax position.

---

Finding the Right Ownership Balance

In many situations, a balanced ownership structure can offer greater flexibility.

Splitting assets appropriately may allow couples to:

• Use both personal income tax allowances
• Spread capital gains between two individuals
• Potentially reduce  exposure to higher tax bands
• Retain control over business interests
• Manage inheritance tax exposure

That said, equal ownership is not always the right solution. Some couples may prefer concentrated ownership for administrative simplicity or to maintain business control.

A common approach is usually a balance between tax efficiency, control and long-term flexibility.

---

Seeing the Bigger Financial Picture

The UK tax system may be complex, but for married couples and civil partners it can also offer significant opportunities.

By carefully structuring asset ownership, households can influence:

• How much income tax is paid each year
• When capital gains are realised
• How effectively allowances are used
• The potential inheritance tax exposure of the estate

Over time, these differences can compound into a meaningful gap in financial outcomes.

Financial planning often looks beyond individual investments and considers the household as a whole. When asset ownership is structured thoughtfully — and reviewed regularly as circumstances evolve — it may help manage tax exposure and support long-term financial outcomes.

And importantly, because allowances and exemptions typically operate on a use-it-or-lose-it basis each tax year, reviewing arrangements regularly helps ensure valuable planning opportunities are not missed.This communication is for informational purposes only based on our understanding of current legislation and practices which are subject to change and are not intended to constitute, and should not be construed as, tax advice, investment advice, investment recommendations or investment research. Investing involves risk. The value of investments can go down as well as up, and you may not get back the amount originally invested. Past performance is not a reliable indicator of future results. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions

---

 [RS1]Could potentially be increased

 [RS2]Allows for

 [RS3]An

 [RS4]Potentially reduce

 [RS5]Some couples may prefer

 [RS6]Revise heading – bigger picture implies there is a perspective only the author can provide