Married couples and civil partners are taxed separately for Capital Gains Tax (CGT), meaning each person has their own annual tax position. However, with careful planning, transferring assets between spouses or civil partners can sometimes help reduce their overall tax bill.
Where spouses or civil partners are living together, most transfers of assets between them take place on a 'no gain, no loss' basis. This means there is no immediate CGT charge when the asset is transferred. Instead, the receiving spouse effectively utilises the original purchase cost and any gain is calculated based on this cost when they eventually dispose of the asset.
This can be particularly useful where one spouse pays tax at a lower rate or has unused CGT allowances. By transferring an asset before it is sold, the gain may be taxed more efficiently, potentially reducing the overall CGT liability.
Ownership is also important. If an asset is genuinely owned beneficially by one spouse, that spouse is responsible for reporting any gain. Couples should ensure that legal ownership reflects the intended beneficial ownership, particularly where jointly owned assets are involved.
Special rules also apply if a couple permanently separates. In many cases, transfers between former spouses or civil partners can still qualify for no gain, no loss treatment for up to the end of the third tax year after separation, while transfers made under a formal divorce or separation agreement or court order can continue to receive this treatment without any time limit.
