When you don’t have to pay Capital Gains Tax

In most cases, there is no Capital Gains Tax (CGT) to be paid on the transfer of assets to a spouse or civil partner. There is, however, still a disposal that has taken place for CGT purposes, effectively, at no gain or loss on the date of the transfer. When the asset ultimately comes to be sold the gain or loss will be calculated from when the asset was first owned by the original spouse or civil partner.

There are a few exceptions that couples should be aware of when the relief does not apply. This mainly relates to the use of goods which are sold on by the transferee’s business and for couples that are separated or divorced. The CGT rules that apply during separation and divorce changed for disposals that occurred on or after 6 April 2023.

These changes extended the period for separating spouses and civil partners to make no gain/no loss transfers extended to up to three years after they cease to live together. The new rules also provide for an unlimited time if the assets are the subject of a formal divorce agreement. Previously, the no gain/no loss treatment was only available in relation to any disposals in the remainder of the tax year in which the separation occurred. If a transfer does not ultimately qualify for relief, then the asset must be retrospectively valued at the date of the transfer and the transferor is liable for any gain or loss.

There are similar rules for assets that are gifted to charities. However, Capital Gains Tax may be due where an asset is sold to a charity for more than was paid for it and less than the market value. The gain in this case would be calculated based on what the charity paid rather than the market value of the asset.