Transferring Assets Between Spouses, CGT Rules

No-Gain No-Loss Transfers

Transfers of assets between spouses and civil partners who are living together are treated as no-gain no-loss transactions for CGT purposes under TCGA 1992 s58. This means no CGT arises at the point of transfer, regardless of the asset's current market value. The receiving spouse acquires the asset at the transferring spouse's original acquisition cost (plus any capital improvements), not at its current value. The base cost carries over.

This rule applies automatically to all transfers between cohabiting spouses and civil partners, there is no election required and no form to file. It applies to all assets: shares, property, crypto, business interests. The rule does not apply to couples who are separated or who have permanently ceased living together, see the year-of-separation trap below.

Why This Matters for Planning

The no-gain no-loss rule enables a straightforward and HMRC-compliant strategy: transfer an asset to the lower-income spouse before sale, so that the eventual gain is taxed at their lower CGT rate. A higher-rate taxpayer with a £50,000 gain on shares would pay CGT at 20%, giving a liability of approximately £9,400 after the AEA. If the same asset is transferred to a basic-rate taxpayer spouse before disposal, the same gain is taxed at 10%, a liability of approximately £4,700, a saving of £4,700.

The strategy works for the annual exempt amount too. If one spouse has already used their £3,000 AEA and the other has not, transferring an asset with a £3,000 gain to the unused-AEA spouse before sale means the gain is entirely tax-free. Over a lifetime of investing, using both spouses' AEAs systematically generates meaningful tax savings. The transfer must be a genuine and unconditional gift to the other spouse, it cannot be conditional on the sale proceeds being returned.

The Year-of-Separation Trap

The no-gain no-loss rule only applies while spouses or civil partners are living together. For CGT purposes, 'living together' means not separated under a court order or separation agreement, and not in circumstances where the separation is likely to be permanent. Once a couple separates permanently, the rule ceases to apply, even if the divorce has not yet been finalised.

For tax years from 2023/24 onwards, there is an extended window: separating couples have until the end of the third tax year following the year of separation to transfer assets between themselves on a no-gain no-loss basis. This extended window was introduced to give divorcing couples more time to sort out financial settlements without tax charges arising. Before this change, the window closed at the end of the tax year of separation, often only weeks or months, creating urgent and poorly-timed disposals. The extended window significantly reduces pressure on separating couples to rush asset transfers.

Gifts to Others, Deemed Proceeds Rule

The no-gain no-loss treatment is exclusive to spouses and civil partners. Gifts to anyone else, children, siblings, friends, cohabitees, trigger CGT at the asset's market value at the date of the gift, regardless of whether any money changes hands. This is the deemed proceeds rule: HMRC treats the gift as if you had sold the asset at open market value.

For example, gifting shares currently worth £30,000 that you originally bought for £10,000 creates a taxable gain of £20,000. The fact that you received nothing for them is irrelevant, CGT is calculated on the market value. Hold-Over Relief is available in limited circumstances for gifts of business assets, meaning the gain can be deferred until the recipient eventually sells. But for most assets, shares in listed companies, investment property, crypto, no hold-over is available, and the gift triggers an immediate CGT charge at market value.