Capital Gains Tax liability

You and your spouse or civil partner are treated as separate individuals for Capital Gains Tax purposes. Each of you will pay tax only on your own gains and you’ll get relief only for your own losses. Although you’re taxed separately, you may be treated as ‘connected’ with each other and with each other’s relatives for certain purposes.

If you and your spouse or civil partner are living together, any transfer of an asset between you is treated as giving rise to neither a gain nor a loss to the person transferring it. Any amount actually paid is ignored. If the person receiving the asset later disposes of it, they’ll be treated as if they had paid an amount equal to the total of your costs.

If you’re not living together or the asset involved is trading stock, any asset transferred between you is treated as transferred at its market value at the time of the transfer. So, in these circumstances, the person transferring the asset may make a chargeable gain or an allowable loss.

If you transfer exempt employee shareholder shares to your spouse or civil partner the shares are also treated as transferred at their market value at the time of transfer but you make no chargeable gain or allowable loss. Similarly, any asset transferred at the time of death is treated as acquired at its market value at that date and there’s no chargeable gain or allowable loss. In general, a person who inherits from their late spouse or civil partner is treated in the same way as any other person who inherits on death.

Non-resident Capital Gains Tax

For Non-resident Capital Gains Tax purposes all disposals by non-residents of UK residential property must be reported using HMRC’s online return form within 30 days of conveyance of the property whether or not there’s a chargeable gain or tax to pay. This includes assets transferred to a spouse or civil partner. If a property was jointly owned each owner must tell HMRC about their own gain or loss.

If the spousal transfer is on or after 6 April 2015, the transferee is treated as acquiring the asset, but they cannot rebase as they have acquired the asset after 5 April (even though the non-resident transferee may have acquired the asset before then).

Assets held in your name

You’re chargeable to CGT if you dispose of an asset held in your name, unless you’re holding it on behalf of another person, such as your spouse or civil partner. If you’re holding an asset on behalf of your spouse or civil partner, your spouse or civil partner is commonly known as the beneficial owner and will pay tax if a gain is made from its disposal.

To decide which of you should return any gain and pay any tax, you should consider:

  • whether you and your spouse or civil partner have made a formal declaration about beneficial ownership using form 17, Declaration of beneficial interests in joint property and income
  • who provided the cost price and whether the asset was bought as a gift for your spouse or civil partner
  • who received the proceeds of the disposal

What counts as ‘living together’

You and your spouse or civil partner are treated as living together unless you’re separated:

  • under a court order
  • by a formal Deed of Separation executed under seal (in Scotland a deed should be witnessed)
  • in such circumstances that the separation is likely to be permanent

In each case the marriage or civil partnership must have broken down. If the marriage or civil partnership has not broken down but the 2 of you don’t live in the same house, you’re still treated as living together for Capital Gains Tax purposes.

Separation, divorce and dissolution

The remainder of this helpsheet explains your Capital Gains Tax liability if you’re separated or divorced or your civil partnership is dissolved and you’ve transferred assets to the spouse or civil partner from whom you’re separated, or to a former spouse from whom you’re divorced, or to a civil partner from a civil partnership which has been dissolved.

Year of permanent separation

If you or your spouse or civil partner were living together at some time in a tax year, you can transfer assets between you at any time in that tax year at no gain or loss. There’s no requirement that you should be living together at the time of transfer.

If a transfer occurs between you and your spouse or civil partner after the end of the tax year in which you stop living together, there are rules to decide the date of disposal and the amount of consideration on disposal. These rules depend on your particular circumstances and the information you’ll need is the date of:

  • any decree absolute or dissolution of the civil partnership
  • the court order if the asset was transferred by such an order
  • any other contract under which the asset was transferred

Private Residence Relief

You may be entitled to Private Residence Relief on any gain arising on the disposal of your only or main residence. You and your spouse or civil partner can’t have more than one residence or main residence between you for the purposes of the relief at any time while you’re living together. (You’re treated as living together unless you’re separated under a court order, or by Deed of Separation, or are otherwise separated in such circumstances that the separation is likely to become permanent.) Following separation, the residence which is your only or main residence for the purposes of the relief need not be the same as that which is your spouse’s or civil partner’s only or main residence for such purposes.

Full Private Residence Relief will not be due where, as part of a financial settlement on separation, divorce or dissolution, the spouse or civil partner who has ceased to occupy the matrimonial or civil partnership home:

  • transfers an interest in that home to the other spouse or civil partner
  • the date of transfer takes place more than 18 months after the time when the spouse or civil partner last occupied the matrimonial or civil partnership home

The former matrimonial or civil partnership home can be treated as the only or main residence of the transferring spouse or civil partner from the date their occupation ceased until the earlier of the:

  • date of transfer
  • date on which the spouse or civil partner to whom the property is transferred ceases to use it as their only or main residence