Capital Gains Tax and Divorce UK 2026/27 | CGT on Marital Assets

CGT rules change on separation and divorce. Since 6 April 2023, transfers between separating spouses are no gain, no loss until the end of the third tax year after separation, or with no limit under a court order; outside that, CGT at 18% or 24% can apply. This guide explains what to watch for.

Full guide: CGT on divorce and separation: the rules since April 2023.

The Key Rule: Tax Year of Separation

The CGT treatment of asset transfers between spouses and civil partners depends critically on timing. While a couple are living together (treated as living together for tax purposes), any transfer of assets between them happens at no gain and no loss, effectively at the original cost, so no CGT arises. Before 6 April 2023, this exemption only continued until the end of the tax year (5 April) in which the couple permanently separated.

Under those old rules, an asset transferred after that 5 April was treated as a disposal at market value, so the transferring spouse could face CGT on any rise in value, and couples who separated late in a tax year had very little time to complete transfers.

For disposals on or after 6 April 2023, the window was extended. Separating spouses and civil partners can now transfer assets at no gain, no loss until the end of the third tax year after the tax year they stopped living together, or the day a court grants the divorce or dissolution if that is earlier. For assets transferred under a formal divorce or separation agreement or a court order, there is no time limit. Outside these rules, a transfer is treated as a disposal at market value.

The Former Marital Home, Private Residence Relief

The former matrimonial home is often the most valuable asset in a divorce. If the property was the main residence of both spouses throughout ownership, Private Residence Relief (PRR) normally exempts the gain in full. The final 9 months of ownership also count as a period of main residence, even if the departing spouse has already moved out.

Problems arise when the gap between leaving the property and completing the sale exceeds 9 months. If you moved out 18 months before the sale completed, only the last 9 months are protected by the final-period rule, the 9-month gap before that is potentially chargeable. For divorces involving a lengthy sale process, this can create unexpected CGT for the departing spouse.

Since 6 April 2023, HMRC's helpsheet HS281 gives the departing spouse two options. They can elect to treat the time after they moved out as if it were still their residence, where this is under a formal divorce or separation agreement or court order, the other spouse keeps the home as their only or main residence until it is sold, and the departing spouse has not nominated another home for that period. And a spouse who transfers their share to the other under a formal agreement or court order, but is entitled to a percentage of the proceeds when the home is eventually sold, can apply the same tax treatment to that money as applied when they transferred their share.

Calculating CGT on a Jointly Owned Property Sale After Divorce

When the matrimonial home is sold after divorce (rather than transferred to one spouse), each party computes their own CGT based on their share of the gain. The gain is split 50/50 for jointly owned property unless ownership is documented differently. Each person applies their own annual exempt amount (£3,000 for 2026/27) and their own income to determine the rate.

For example: a couple bought a second property in 2015 for £200,000 and sell it in 2026/27 for £320,000. After selling costs of £5,000, the total gain is £115,000. Each spouse has a £57,500 share of the gain. After the £3,000 annual exempt amount, each has a taxable gain of £54,500. A higher-rate taxpayer would owe 24% × £54,500 = £13,080. A basic-rate taxpayer with £40,000 of salary has £10,270 of remaining basic-rate band (£50,270 − £40,000). The first £10,270 is taxed at 18% = £1,849; the remaining £44,230 at 24% = £10,615, total £12,464.

Shares and Other Investments in Divorce Settlements

Share portfolios and other investments transferred as part of a divorce settlement benefit from the same extended no-gain no-loss window (three years from the end of the year of separation, or indefinitely if under a court order). The receiving spouse takes over the original cost base, they inherit the history of the asset.

This means the receiving spouse could face a significant latent CGT liability on assets transferred to them. A share portfolio worth £80,000 that cost £30,000 carries an embedded gain of £50,000. If transferred at no gain/no loss, the receiving spouse takes over the £30,000 cost, they will pay CGT on the full £50,000 (plus any further growth) when they eventually sell. Both parties should consider this embedded liability when negotiating the division of assets.

Rates for 2026/27: shares and most other assets are taxed at 18% for gains within the basic-rate band and 24% for gains in the higher or additional-rate band. The same rates apply to residential property (other than your main home).