Splitting jointly owned property: exchange relief

When co owners split jointly held property so that each ends up owning part outright, each of them is making a disposal for Capital Gains Tax even if no money changes hands. Sections 248A to 248E of the Taxation of Chargeable Gains Act 1992 let each owner claim a form of rollover relief, so the exchange is treated as giving no gain and no loss and the deferred gain reduces the base cost of what they now own. Cash paid to balance unequal values is taxed, and homes that will be lived in follow separate rules.

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Why is splitting jointly owned property a disposal at all?

If two people own two buildings jointly and agree that each will take one, each gives up their share of the building they will not keep in return for the other’s share of the building they will keep. HMRC’s Capital Gains Manual at CG73000 confirms that an exchange of interests in jointly owned property is a disposal by each owner, and that this is so even where no money changes hands. The consideration is the value of the interest received.

The statutory relief has applied to exchanges on or after 6 April 2010. Before that date the same idea was given by Extra Statutory Concession D26, published in 1984.

What conditions must be met?

Section 248A sets out five conditions, all of which must be met:

Condition A: the owner claiming relief (the landowner, in the legislation) and one or more co owners jointly hold either a single holding or two or more separate holdings.
Condition B: the landowner disposes of an interest in the holding or holdings (the relinquished interest) to one or more of the co owners.
Condition C: the consideration is or includes an interest in a holding held jointly by the landowner and one or more of the co owners (the acquired interest).
Condition D: as a result, taken together with any related disposals made at the same time, the landowner and each co owner become the sole owner of part of the single holding, or of one or more of the separate holdings.
Condition E: the acquired interest is not an interest in excluded property, broadly a home that will qualify for private residence relief (see below).

Holding jointly means as joint tenants or tenants in common in England and Wales (and coparceners in Northern Ireland), or as joint owners or owners in common in Scotland. Both forms of co ownership qualify, which our guide to joint tenants and tenants in common explains. Spouses or civil partners living together are treated as one landowner or one co owner, and section 248A(8) extends the relief to property held by a partnership of the owners.

Condition D is the one that most often fails. The relief is for ending joint ownership. If after the exchange two people still hold a building jointly, or one owner ends up with nothing held outright, the relief does not apply.

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How is the relief calculated?

Section 248B gives two outcomes, depending on whether the landowner receives more value than they give up:

Situation	Effect of the claim
Value given up is equal to or less than value acquired	The disposal is treated as giving no gain and no loss. The cost of the acquired interest is reduced by the gain that would otherwise have arisen.
Value given up is more than value acquired (for example where cash is received)	If the excess (the unexpended consideration) is less than the gain, the gain is reduced to that excess and taxed now. The cost of the acquired interest is reduced by the amount of gain deferred.

Section 248B(4) confirms that one owner’s claim has no effect on another owner’s tax position. Each co owner considers their own claim. Where two owners are connected, such as siblings or a parent and child, CG73000 explains that market value is used under section 17 and any equalisation payment is ignored, because the market value rule already captures the difference in values. Our guide to connected persons covers who is connected.

Worked example

Illustration only. Amir and Ben, who are not connected, bought two let houses together as equal tenants in common for £150,000 each. They decide to split: Amir takes North House, now worth £320,000, and Ben takes South House, now worth £280,000. To balance the values Amir pays Ben £20,000. Each half share cost £75,000.

Amir gives up his half of South House (worth £140,000) and acquires Ben’s half of North House (worth £160,000, for which he gives his half of South House plus £20,000). Value given up is less than value acquired, so the gain of £65,000 (£140,000 less £75,000) is fully deferred. His cost for the half acquired is £160,000 less £65,000, which is £95,000. His total base cost for North House is £75,000 plus £95,000, which is £170,000.
Ben gives up his half of North House and receives Amir’s half of South House plus £20,000, total consideration £160,000. The value acquired is £140,000, so the unexpended consideration is £20,000. His gain is £85,000 (£160,000 less £75,000), which is reduced to £20,000 and taxed now. The £65,000 deferred reduces his cost for the half acquired to £75,000, giving a total base cost for South House of £150,000.

The only gain taxed now is on the cash Ben received. Both owners carry lower base costs into the future, so the deferred gains will be taxed on a later sale.

What about homes?

Section 248C excludes property that is a dwelling house, or part of one, where private residence relief would exempt all or part of a gain on its disposal by the landowner at any time in the 6 years beginning with the acquisition. If property that was not excluded becomes excluded within that period, for example because the owner moves in, the original gain is recalculated without the relief, and section 248C(4) allows HMRC to make the adjustment at any time, despite the normal time limits for assessments. Without this rule a deferred gain could later be washed out by private residence relief.

Homes have their own relief in section 248E. It applies where co owners jointly hold two or more dwelling houses, exchange interests so that each house becomes the only or main residence of one owner (and only one), and each house would be fully covered by private residence relief if it were sold immediately afterwards. Unlike the main relief, the claim must be made jointly by all the owners. The relinquished interest is treated as disposed of for no gain and no loss, and the acquired interest is treated as acquired when the property was first acquired jointly, at the co owner’s original cost (CG65155).

How and when is the claim made?

A claim under section 248B is made by each owner, normally in the Self Assessment return for the year of the exchange with details in the additional information, and CG73000 states that the general time limit in section 43 of the Taxes Management Act 1970 applies. For individuals that is 4 years after the end of the tax year. CG13700 says a claim should identify the claimant and their Unique Taxpayer Reference, the claim being made, the assets, the values used and the amount. Professional valuations of each interest at the date of exchange will usually be needed, since the relief depends on comparing them.

Stamp Duty Land Tax also has a partition rule: under paragraph 6 of Schedule 4 to the Finance Act 2003, the share an acquirer already held immediately before a partition does not count as chargeable consideration. See our guide to Stamp Duty Land Tax for the rest of the calculation.

What mistakes come up most often?

Assuming there is nothing to report because no money changed hands.
Splitting in a way that leaves some property still jointly owned, so condition D fails.
Claiming the main relief where one owner will live in the property they acquire, so the property is excluded and the relief is later withdrawn.
Ignoring the equalisation payment, which is taxed in the hands of the person receiving it.
Losing the reduced base cost from the records, so the deferred gain is missed on a later sale.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.