When you transfer a property (or a share of a property) to your spouse or civil partner, no CGT arises on the transfer itself. The receiving spouse takes over the original base cost as if they had acquired the property at the same time and for the same amount as the transferring spouse. This is automatic — it does not need to be claimed or elected. The only requirement is that the couple are married or in a civil partnership and are living together at the time of the transfer.
The planning opportunity arises when the property is subsequently sold. If the transfer shifts ownership to a spouse who is a basic rate taxpayer, part or all of the gain may be taxed at 18 per cent rather than 24 per cent. Both spouses can use their annual exempt amounts, which doubles the exemption available. For a gain of, say, GBP100,000, using both annual exempt amounts and accessing the basic rate band on part of the gain could reduce the CGT by several thousand pounds.
The no-gain/no-loss treatment between spouses continues until the end of the tax year following the tax year of separation. Under the rules revised from April 2023, this gives separating couples a longer window than was previously available. After that window closes, transfers between former spouses are treated as disposals at market value, which can trigger a CGT liability. If you are separating and there are properties to be divided, the timing of the transfer relative to the separation date is critical.
Transfers between parents and children, siblings, business partners, and other connected persons are NOT no-gain/no-loss. They are treated as disposals at market value regardless of the actual price paid — even if the property is gifted for nothing. This catches people out regularly. A parent gifting a property to their child triggers a CGT disposal at the market value of the property, with the parent paying CGT on the difference between their original base cost and the current market value.
The connected party rules apply broadly. They cover family members, business partners, companies under common control, and in some cases trustees. If you are transferring a property to anyone other than a spouse or civil partner you are living with, assume the disposal will be treated at market value until a specialist has confirmed otherwise.
The transfer must be genuinely completed before the subsequent sale for the planning to be effective. This means the Land Registry transfer should be registered, not just agreed between the parties. Where the property has a mortgage, the lender’s consent may be required before the transfer can proceed, and this can take time. We advise on the practical steps alongside the tax analysis to ensure the transfer is effective and does not hold up the sale.
We calculate the CGT position with and without a spouse transfer so you can see the actual tax difference. We advise on the practical steps required to complete the transfer, including Land Registry and mortgage considerations. We check that the planning is viable given your circumstances — including separation status, timing, and any anti-avoidance considerations. After the subsequent sale, we file the 60-day CGT return.
Schedule a free 30-minute consultation to discuss your personal tax compliance.
