Taxation (UK) · The computation of capital gains tax

Capital Gains Tax Planning and Spouse Transfers

Updated 11 October 2026 · Fact-checked

Transfers between spouses or civil partners living together are treated as made at no gain and no loss. The receiving spouse takes over the original cost. You then plan by splitting gains so each person uses the annual exempt amount of £3,000 and, where possible, the 18% lower rate band.

Understand Capital Gains Tax Planning and Spouse Transfers

A disposal of a chargeable asset normally creates a gain or loss. The exception is a transfer between spouses or civil partners who are living together in the tax year of transfer. The transfer is treated as made at no gain, no loss. The transferor's proceeds are taken to equal their cost (with any enhancement expenditure), so no gain or loss arises.

The receiving spouse steps into the shoes of the giver. Their base cost is the giver's cost, and the original acquisition date carries over. The gain is only taxed when the receiver later sells to a third party. So the transfer moves the future gain to the other spouse.

This is useful because each person has their own annual exempt amount of £3,000 and their own rate bands. Capital gains tax is 18% on gains falling within the unused basic rate band, and 24% on the rest. The unused basic rate band is £37,700 less taxable income (after the personal allowance). Gains are taxed after income, so a spouse with low income has more band at 18%.

Planning therefore means: if one spouse has unused annual exempt amount, losses or basic rate band and the other does not, transfer the asset (or part of it) to the spouse who is better placed, then let that spouse sell. The transfer must be a genuine, outright gift. You cannot use the annual exempt amount or the lower band of one spouse unless that spouse really owns the asset.

The annual exempt amount cannot be transferred between spouses and unused amounts cannot be carried forward. Use it or lose it. Losses are different: a current year loss of one spouse cannot be set against the other's gains. Planning can move the asset so the gain and the loss fall on the same person.

Key rules to remember

Spouse transfer deemed proceeds: Deemed proceeds = original cost (plus enhancement expenditure) of transferor; Applies to spouses or civil partners living together in the tax year of transfer. Gain = nil, loss = nil.
Receiving spouse's base cost: Base cost = transferor's cost; acquisition date = transferor's date; The later sale by the receiver is then computed using this cost.
CGT annual exempt amount: £3,000 per individual per tax year; Not transferable and cannot be carried forward.
CGT rates: 18% within unused basic rate band; 24% above; Unused basic rate band = £37,700 − taxable income. Gains are treated as the top slice of income.
Taxable gain: Net chargeable gains − current year losses − brought forward losses (only as needed) − annual exempt amount; Current year losses are set off in full. Brought forward losses are used only to reduce gains to the annual exempt amount.
Business asset disposal relief: 14% on qualifying gains up to £1,000,000 lifetime limit; Available for qualifying disposals; each spouse has their own limit if qualifying conditions are met.

How to solve Capital Gains Tax Planning and Spouse Transfers questions

Use this method for any question asking how a couple can reduce capital gains tax.

1Identify who owns the asset and who plans to sell. Check the couple are married or civil partners and living together.
2Compute each spouse's gain on a sale to a third party, using the original cost if the asset is first transferred between them.
3List each spouse's taxable income, losses and annual exempt amount used so far.
4Work out each spouse's unused basic rate band: £37,700 less taxable income after the personal allowance.
5Compare the tax if the original owner sells with the tax if the other spouse sells after a no gain no loss transfer. Use 18% and 24% correctly.
6Allocate gains so each spouse uses the £3,000 exempt amount and as much 18% band as possible. Match losses to gains in the same person.
7State the saving in pounds and note conditions: the transfer must be outright, and the transfer itself has no gain or loss.

Quickest way: Equalise the exempt amounts and bands

When to use it: Use in objective test questions and short Section C parts where you only need the best owner or the saving.

Ask: who has income below £37,700 or unused losses or exempt amount?
Assume no gain no loss on the transfer, so the gain is the same total whoever sells.
Fill the lower earner's £3,000 first, then their 18% band, then spill over at 24%.
Saving = difference in tax between the two scenarios. Check the sum of both gains equals the original total.

Common mistakes in Capital Gains Tax Planning and Spouse Transfers

Computing a gain on the transfer between spouses using market value.
Students apply the normal rule for gifts, which uses market value.
Fix: Check the couple are spouses or civil partners living together. Then use no gain no loss, with deemed proceeds equal to cost.
Giving the receiving spouse a base cost equal to market value at transfer.
Students treat the transfer as an acquisition at market value.
Fix: The receiver takes the transferor's original cost and date. Only the later sale to a third party creates a gain.
Using the 24% rate for the whole gain without checking the basic rate band.
Students forget that gains use any unused basic rate band at 18%.
Fix: Compute taxable income first. Unused band is £37,700 less taxable income. Apply 18% to the gain within it and 24% to the rest.
Transferring the annual exempt amount to the other spouse.
Students think married couples share allowances as with the marriage allowance.
Fix: Each person has their own £3,000. Plan by splitting the gain, not by moving the exempt amount.
Setting one spouse's capital loss against the other's gain.
Students assume couples are taxed jointly.
Fix: Losses are personal. If the loss and the gain sit with different spouses, consider moving the asset so both fall on one person.
Applying no gain no loss to spouses who are separated or after the year of separation.
Students ignore the living together condition.
Fix: State the condition. The rule applies if they are living together in the tax year of transfer.

Worked examples

Example 1

Harriet bought a painting-free investment property for £60,000 several years ago. It is now worth £90,000. She has taxable income of £60,000 and no other gains. Her husband Ivan has taxable income of £10,000 (after the personal allowance) and no gains. Harriet plans to sell the asset for £90,000 in the current tax year. Show how transferring it to Ivan first reduces the capital gains tax. Ignore selling costs.

Show the solution

Total gain is £90,000 − £60,000 = £30,000 whoever sells.
If Harriet sells: gain £30,000 less annual exempt amount £3,000 = £27,000 taxable. Her income of £60,000 exceeds the basic rate band, so all of it is at 24%: £27,000 × 24% = £6,480.
If she first gives the asset to Ivan, the transfer is no gain no loss, so Ivan's base cost is £60,000. He sells for £90,000, gain £30,000.
Ivan's taxable gain is £30,000 − £3,000 = £27,000.
Ivan's unused basic rate band is £37,700 − £10,000 = £27,700. All £27,000 is within it, so tax is £27,000 × 18% = £4,860.
Saving = £6,480 − £4,860 = £1,620.

Answer: Transferring to Ivan first reduces the tax from £6,480 to £4,860, a saving of £1,620.

Example 2

Marcus and Nadia are married and live together. Marcus owns shares bought for £20,000, now worth £44,000. Nadia owns other shares bought for £30,000, now worth £24,000 (a loss). Both have taxable income above £37,700 and have not used any exempt amount this year. Marcus wants to sell his shares. Advise how Nadia's loss can be used.

Show the solution

Marcus's gain on selling his shares is £44,000 − £20,000 = £24,000.
Nadia's loss on her shares if she sells is £24,000 − £30,000 = £6,000 loss.
If both sell separately, losses cannot be set against the other spouse. Nadia's loss would remain unused unless she has other gains. Marcus pays tax on £24,000 − £3,000 = £21,000 at 24% = £5,040.
Planning: Nadia can sell her shares for the £6,000 loss and the loss can be carried forward for her own gains, but this does not help Marcus now.
Alternative: Marcus transfers part of his shares to Nadia at no gain no loss. Suppose he transfers shares with cost £10,000 and value £22,000. Nadia sells them: gain £12,000. She also sells her own shares: loss £6,000. Net gain £6,000, which is covered by her £3,000 exempt amount only in part: net £6,000 − £3,000 = £3,000 taxable at 24% = £720.
Marcus sells the remaining shares: cost £10,000, proceeds £22,000, gain £12,000 − £3,000 exempt = £9,000 × 24% = £2,160.
Total tax = £720 + £2,160 = £2,880, compared with £5,040.

Answer: By moving part of the shareholding to Nadia before sale, the loss and a share of the gain fall on the same person and both exempt amounts are used. Tax falls from £5,040 to £2,880, a saving of £2,160.

Exam tips

Start any planning answer by stating the rule: no gain no loss for spouses or civil partners living together. It earns a mark on its own.
Show the unused basic rate band calculation. Examiners reward the figure £37,700 less taxable income.
Use both spouses' £3,000 exempt amounts in the final comparison and state the pound saving.
In objective questions, check for traps: separated couples, transfers to unmarried partners, and market value base cost.
Label the computations for each spouse separately so marks for each person are easy to give.

Practice questions from The computation of capital gains tax

Capital Gains Tax Planning and Spouse Transfers in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CS ProfessionalTransfer of Capital Assets and Capital Gains Treatment

Capital Gains Tax Planning and Spouse Transfers: frequently asked questions

What does no gain no loss mean for a spouse transfer?

It means the transfer is treated as made for proceeds equal to the giver's cost, so no gain or loss arises. The receiving spouse takes the same cost and acquisition date. The gain is only charged when the receiver sells outside the marriage.

Can I transfer my annual exempt amount to my spouse?

No. Each person has their own £3,000 annual exempt amount and unused amounts are lost. You can, however, transfer an asset so that the gain arises with the spouse who has an unused exempt amount.

Does no gain no loss apply to unmarried couples?

No. It applies only to spouses and civil partners who are living together in the tax year of the transfer. Transfers to others are normally treated as made at market value.

How do I decide which spouse should sell?

Compare their taxable income, unused basic rate band, exempt amounts and losses. Gains falling in the unused basic rate band are taxed at 18%. The rest is taxed at 24%, so the spouse with more unused band usually pays less.