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Capital Gains Tax on Property for Married Couples - Indian Couple sharing property income

Capital Gains Tax on Property for Married Couples

17/09/2021
(Last Updated: 14/02/2024)
3,088
8 min read
Key Takeaways
  • 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?

The Capital Gains Tax on residential sale profit is as follows:
 
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)
 
Non-UK Residents pay a flat rate of 28% for any gain.
 
You have a tax free allowance of £3,000 for 2023-24.
 


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
  • Draft a deed of assignment. There is no need to add your partner to the legal title to share capital gains with them. You can share the ownership in any percentage split that suits your tax position, but don't forget to utilise both your tax-free allowances (whilst they are still there to use). Read more - When to do a transfer of equity.
  • File a Form 17. Whilst there is no obligation to file a Form 17 because the property isn't jointly owned, some married couples choose to file a Form 17 to provide HMRC with their signed, witnessed and dated deed for their records. Read more - When do married couples need to file a Form 17?
  • Sell the property. The CGT rate payable is applicable at the exchange date, not the completion date. Be careful around budget time, as rates may go down or up.
  • File Capital Gains Tax on UK Property Return. You have 60 days from completion to file your return and pay for the tax liability. You file separate returns for your individual CGT declaration. You can use an accountant or file a return online here - HMRC - Report and pay your Capital Gains Tax.

  • Are you tenants in common?. Most married couples own the property as joint tenants, which means they share any capital gain equally. To utilise more of your spouses lower tax bracket, you'll need to sever the joint tenancy and register as tenants in common. This can take a few weeks to update at the Land Registry. Read more - How do you sever a joint tenancy for tax purposes?.
  • Draft a deed of assignment. You can assign your share in the property using a Deed of Assignment. Read more - What is a deed of assignment?.
  • File a Form 17. HMRC have an automatic assumption that jointly owned property is owned equally between married couples. If this is not the case you must file a Form 17 and declare your percentage ownership. Read more - When do married couples need to file a Form 17?
  • Sell the property. The CGT rate payable is applicable at the exchange date, not the completion date. Be careful around budget time, as rates may go down or up.
  • File Capital Gains Tax on UK Property Return. You have 60 days from completion to file your return and pay for the tax liability. You file separate returns for your individual CGT declaration. You can use an accountant or file a return online here - HMRC - Report and pay your Capital Gains Tax.



  • Further Information: CG22202 - Transfer of assets: between spouses or between civil partners living together: year of separation



    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.

    Frequently Asked Questions
    DIFFERENT
    SELLON
    UNEQUAL
    WIFE
    Andrew Boast of Sam Conveyancing
    Written by:
    Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
    Caragh Bailey, Digital Marketing Manager
    Reviewed by:

    Caragh is an excellent writer in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.


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