Hello, I'm Keith and happy to help you with your question.
Married couples have, for tax purposes been separated, long since. However, there are some interfaces.
For example from 15/16 tax year one spouse will be able to transfer up to 1K of their unused personal allowance to the other.
IHT is another interface area. If one dies before the other any of their unused 325K allowance for IHT purpose may be added to the survivor's 325K to reduce their exposure to the tax. Of course, if there is no surplus this is not possible. Unfortunately your question says her bungalow value is £200, perhaps you mean 200K. If so this would leave 75K of her nil rate IHT allowance to pass on to you should she predecease you. Inter spousal bequests and transfers do not attract tax and if such bequests and gifts are made they are not subject to IHT anyway. You might have inherited some of your first wife's 325K allowance also; worth checking.
i do hope I have been able to set your mind at rest on this matter and given you some food for thought.
Thank you. I am feeling better since it is all good news up to now. Arising there are two more questions which come to mind.
1. My wife dies in October 2011 and she had no capital. Does that mean that I have inherited her IHT allowance.
1. Should I re-decease my wife after we get married in July I would like her to continue living in this house until she dies so will my unused allowances pass to her.
Thank you. Very good and sound advice but our plans are made and we have good wills which will be reviewed to take effect on our marriage day.
1. Have I inherited my deceased wife's IHT.
2. How do I transfer some of my allowance to my new wife. I am a higher rate tax payer.