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Capital Gains Tax on Property for Married Couples

Andrew Boast

17/09/2018

Do you need help evidencing an unequal share of property for Capital Gains Tax (CGT)?

We specialise in the transferring of property between married couples for CGT and our solicitors can help you with:

Drafting a deed of trust for Form 17
Transfer of Equity to add partner to the legal title
Selling a property

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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. Your capital gains tax is reduced by each beneficial owner's capital gains tax allowance. HMRC see a married couple as separate individuals for tax purposes and as such if both own a beneficial interest in the sold property then they can both use their capital gains tax allowance to reduce the tax they have to pay.

This is why married couples where one party owns a property on their own, or they jointly own a property, look to share the beneficial interest with their spouse in unequal shares (as tenants in common) to benefit from their capital gains tax allowance.

In this article we explain:

How do you prove a beneficial ownership split between a married couple?

How do you prove an unequal beneficial interest?

Is there any capital gain if you transfer the property to your spouse?

How do you transfer property to your spouse?

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 Check current capital gains tax allowance	X
Amount subject to Capital Gains Tax	X

You should speak to a tax advisor for capital gains tax advice.

How do you prove a beneficial ownership split in property?

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 of trust - Read more about submitting a From 17
proof of who paid for the property and received the sale proceeds
proof that the property was the couple's home

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How to prove an unequal beneficial interest

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.

You can't share the sale proceeds in different shares to the rental income

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".

HMRC Manual - Transfer of assets: husband and wife or civil partners: jointly held assets

Is there any capital gain if you transfer the property to your spouse?

No capital gains tax arises when an property is transferred to a spouse or civil partner. 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 transfer property to your spouse?

You can transfer beneficial ownership by:

Deed of Trust - if you own the property as tenants in common or as a sole legal owner you can draft a deed of trust to share the beneficial interest in the property.
Transfer of Equity - if you are a sole legal owner you can transfer your partner onto the legal title through a transfer of equity. You will still need to draft a deed of trust to confirm the beneficial interest if you own the property in unequal shares.