Independent taxation - taxing spouses (and now civil partners) as two separate people - has now been with us for over 18 years.

Its introduction was a significant reform of the UK tax system and the potential benefits that independent tax offers may frequently be overlooked (see box below). In 2008/09, independent tax means:
•    You and your spouse or civil partner each have personal allowances of £6,035 (potentially more if you are 65 or over by the end of the tax year).
•   You can each receive gross income (after your allowances and reliefs) of £34,800 before starting to pay higher rate tax.
•   You can each realise capital gains of up to £9,600 before you start to pay capital gains tax.

Making the Most of Marriage
Tom is a higher rate taxpayer and his wife, Joan, is a basic rate taxpayer.
•    If Tom receives £1,000 gross interest from a deposit account, he pays £400 in tax. If Joan receives the same gross income, she pays only £200.
•    If Tom makes a £400 gift aid donation to the couple's chosen charity, he receives a tax refund of £100. If Joan makes the same donation, there is no tax refund for her.

As a general rule, you cannot transfer unused allowances or income tax bands between yourselves. This means that maximising the benefits of independent tax will often involve decisions about who holds which investments. In the new tax year, this planning has an added twist because of the abolition of the starting rate (10%) tax band and its replacement with a 10% savings rate band.

Transferring investments will not normally create any inheritance tax or capital gains tax charges, but rearranging investments may be necessary to get the most benefit. For example, a non-taxpayer cannot reclaim tax on UK dividends or the tax paid within a UK life policy. You may also need to consider the knock-on consequences of any transfer, for instance on your inheritance tax planning. It is worth remembering too that transfers must be outright - HM Revenue & Customs would take a dim view if the income from an investment that you claimed to have transferred continued to be paid into your personal account.

Some couples make the most of independent taxation by being in business together. The Chancellor does not like some aspects of this approach to tax planning and has promised anti-avoidance legislation on 'income shifting' in next year's Budget.

The value of tax reliefs depends on your individual circumstances. Tax laws may change. The Financial Services Authority does not regulate tax advice.