Capital Gains Tax on Property for Married Couples
- A husband and wife can transfer shares between each other for no consideration, known as the "no gain no loss rule" .
- A higher rate tax paying husband can assign his share of the property to his basic rate tax paying wife, or vice versa.
- A husband and wife must file a separate CGT Property Return within 60 days of completion.
- For UK residents only, if you make no gain, then you do not need to fill in a CGT Property Return.
- The Capital Gains Tax rate is based on the rate applicable at the time of exchange of contracts, not on completion.
- A married couple can change their ownership at any time up until completion as long as they file a Form 17 to HMRC and get this confirmed.
Capital gains tax is payable on selling any property that isn't your Principal Private Residence (PPR), such as a buy-to-let, second home or an inherited property. The applicable capital gains rate is based on how much income you pay, and you are allowed a tax-free allowance each year.
Married couples have a unique opportunity to transfer the property to each other in a tax-efficient way to allow for a lower income earner to own more of the property and thus declare more CGT against their lower tax bracket.
Why is there no CGT on the disposal to a spouse?
When a property is transferred to a spouse or civil partner, the rules state that no capital gains tax exists. This type of transfer is none as a zero gain or loss (also known as a no gain, no loss) transaction.
Taxation of Chargeable Gains Act 1992 - S.58 - Husband and Wife
The no gain, no loss rule
The Act States: "If, in any year of assessment, and in the case of a woman who in that year of assessment is a married woman living with her husband, the man disposes of an asset to the wife, or the wife disposes of an asset to the man, both shall be treated as if the asset was acquired from the one making the disposal for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the one making the disposal."
Source: Taxation of Chargeable Gains Act 1992
This legislation allows a partner to transfer part of their property to their spouse without that transfer incurring capital gains tax. The married couple can then sell the property and declare a tax-efficient split of the property so that less capital gains tax is payable.
For disposals to anyone other than your married partner, you should read - Capital Gains Tax when gifting to your child.
What is the current rate of Capital Gains Tax?
| Tax Band | Income Tax Band | Capital Gains Tax Rate (chargeable on profits) |
| Basic rate income tax payer | £0 to £50,270 | 18% |
| Higher rate income tax payer | Over £50,271 | 24% (post 6th March 2024 budget) |
How do you transfer your property to your spouse?
We can support drafting deeds and severing joint tenancy to allow you to share capital gains. Call us on 0333 344 3234 or click to contact us online.
Property solely owned by one Spouse or Civil Partner | Property jointly owned by both parties |
|
When can you transfer a gain to your wife?
It is common for the transfer to take place well in advance of a sale so that rental income can be shared in a tax-efficient way. Read more - How to reduce income tax on rental property
How can married couples avoid Capital Gains Tax?
As a married couple, you can share the capital gain between you tax-efficiently because there are currently two rates for CGT, the basic rate and the higher rate. These rates apply to your Income Tax band, and you can find out which one you fall into by looking at the current Income rates here:
The income tax bands on work and rental income are as follows:
| Tax Band | Taxable Income (Employment and Property) | Tax Rate |
|---|---|---|
| Tax Band Tax free allowance | Taxable Income (Employment and Property) £12,570 | Tax Rate 0% |
| Tax Band Higher rate | Taxable Income (Employment and Property) £50,271 to £150,000 | Tax Rate 40% |
| Tax Band Additional rate | Taxable Income (Employment and Property) over £150,000 | Tax Rate 45% |
Source: HMRC - Income Tax Rates
If a husband is in the higher rate tax band for his Income Tax and his wife is in the basic rate, the married couple can avoid paying as much CGT by sharing the property income so that the wife receives more of the gain.
What if both the husband and wife are in the higher rate bracket for CGT?
Where the wife and the husband are both in the higher rate tax band, there is no benefit to assigning more or less to each other unless it it is to utilise the tax free allowance.
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
