Capital Gains Tax on Property for Married Couples
17/09/2021
20,951
5 min read
Capital gains tax is payable on the sale of any property that isn't your Principal Private Residence (PPR) and you can only have one PPR. The CGT rules are different depending on your relationship with the person you are selling the property to (disposing the asset). For disposals to anyone other than your married partner you should read - Capital Gains Tax on Gifted Property.
Capital gains tax for married couples
When a property is transferred to a spouse or civil partner then the rules state that there is no capital gains tax. 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 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."
How do married couples transfer property between each other?
SAM Scenario | How to transfer property? |
Property solely owned by husband/wife | A deed of assignment or deed of trust can be drafted to assign beneficial interest to the other partner. A Form 17 declaration is not required, however you may choose to declare to HMRC any unequal share in property that you solely own. |
Property jointly owned by husband and wife | A deed of assignment or deed of trust can be drafted to assign beneficial interest to the other partner. A Form 17 declaration to HMRC is required to be completed if the beneficial ownership is not shared equally. You can only assign beneficial interest via a deed if the property is held as Tenants in Common. If the property is held as Joint Tenants then you will need to sever the joint tenancy at the Land Registry so you hold the property as tenants in common. |
Frequently Asked Questions
When you sell a jointly owned asset with your husband and wife or civil partner, you need to evidence the beneficial share of the property - read more about beneficial ownership Vs legal ownership. You can evidence a beneficial ownership by:
- a submitted Form 17 to HMRC with a deed
- proof of who paid for the property via a TR1 from the original purchase
- proof that the property was the couple's home
The beneficial interest can be shared however the couples want; 100%/0%, 50%/50% or 99%/1%. HMRC state, "If you live together with your spouse or civil partner, we normally treat income from property held in your joint names as if it belonged to you in equal shares and tax each of you on half of the income, regardless of actual ownership". If this is not the case then you can make a Form 17 declaration to HMRC to confirm the actual beneficial share.
The beneficial interest can be shared however the couples want; 100%/0%, 50%/50% or 99%/1%. HMRC state, "If you live together with your spouse or civil partner, we normally treat income from property held in your joint names as if it belonged to you in equal shares and tax each of you on half of the income, regardless of actual ownership". If this is not the case then you can make a Form 17 declaration to HMRC to confirm the actual beneficial share.
HMRC state,"A couple cannot make a declaration where the split of beneficial ownership of the asset and of the income from it differ. Nor do they have to make a declaration even if they are entitled to. So you should not take the absence of a declaration as being in itself evidence that the beneficial ownership is split evenly".
After a spouse or civil partner transfers a property to their partner, then their partner then sells the property to someone else then there is CGT to pay. For example, if a wife bought a house for £250,000 with purchase costs of £3,500 and gave it to her husband, the disposal proceeds would be treated as £253,500 so that no gain would arise. However, this means that if the husband later sells the property, this cost would be considered to be £253,500 and any capital gain is calculated on that basis.
How do you calculate Capital Gains Tax on property?
£ | |
|---|---|
Proceeds from sale of property | X |
less | |
Incidental costs of disposal eg. estate agent's fee, solicitor's fee | (X) |
Equals net proceeds | X |
less | |
Original purchase price of property | (X) |
Incidental costs of purchase eg. stamp duty, Land Registry cost, solicitor's fee | (X) |
Gain (or loss) | X |
Less capital gains tax allowance | X |
Amount subject to Capital Gains Tax | X |
You should speak to a tax advisor for capital gains tax advice.
We can help
We can help quickly transfer property between married couples by:
- Deed of Assignment
- Deed of Trust
- Transfer of Equity
- Sale conveyancing
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