When spouses or civil partners who are living together transfer an asset between them, section 58 of the Taxation of Chargeable Gains Act 1992 treats it as made for whatever price gives the transferor neither a gain nor a loss. Any money actually paid is ignored and the recipient takes over the original cost. Because each partner has their own annual exempt amount and their own rate band, a genuine transfer before a sale can reduce the total tax the couple pay.

How does a no gain no loss transfer work?

Section 58(1A) and (1B) apply where the disposal is made while the two individuals are married to, or civil partners of, each other and are living together. The transferor is treated as receiving exactly their allowable costs, so no gain or loss arises. HS281 explains that any amount actually paid is ignored, and that when the recipient later disposes of the asset they are treated as having paid the total of the transferor’s costs. The gain on that later sale therefore reflects the whole growth in value since the transferor first acquired the asset.

The rule is automatic; there is no claim or election and it applies to gifts and sales alike. It also applies to part disposals, such as giving a half share of a property, where you will usually need valuations of the part transferred and the part retained (CG22200).

The rule does not apply where:

  • the asset was trading stock of the transferor, or is acquired as trading stock of the recipient’s trade (section 58(2));
  • the disposal is a gift made in contemplation of death (donatio mortis causa);
  • the asset is exempt employee shareholder shares (CG22200).

When are a couple treated as living together?

Section 288(3) TCGA 1992 applies the income tax rule in section 1011 of the Income Tax Act 2007: a married couple or civil partners are treated as living together unless they are separated under a court order, separated by deed of separation, or in fact separated in circumstances in which the separation is likely to be permanent (CG22300). HS281 adds that if the relationship has not broken down, a couple who do not live in the same house, for example because of work, are still treated as living together. A non resident spouse is not treated as separated merely because of residence status (CG22300).

Spouses and civil partners are also connected persons under section 286(2), which is relevant only where section 58 does not apply: a transfer between connected persons is then at market value (CG22000; see connected persons).

How can a transfer reduce the tax on a sale?

Spouses and civil partners are taxed as separate individuals: each pays tax only on their own gains and gets relief only for their own losses (HS281). For 2026 to 2027 each has an annual exempt amount of £3,000, and each pays 18% on gains that fall within their own unused basic rate band (£37,700 for 2026 to 2027) and 24% above it. A couple can use this in three ways:

  • using both annual exempt amounts by giving part of the asset to the other partner before the sale;
  • moving gains to a partner with lower taxable income so more of the gain is taxed at 18%;
  • moving an asset to a partner who has capital losses of their own, since losses cannot be transferred but can be used against that partner’s gains.

Illustration only. Chris, a higher rate taxpayer, owns shares standing at a gain of £20,000. Selling them alone, Chris pays 24% on £17,000 after the annual exempt amount: £4,080. Instead Chris gives half the holding to Jo, who has taxable income of £15,000. Each then sells their half with a £10,000 gain. Chris pays 24% on £7,000 (£1,680) and Jo pays 18% on £7,000 (£1,260): £2,940 in total, a saving of £1,140.

What makes the transfer effective?

The transfer must be real. HS281 says that where an asset is held in one name on behalf of the other, the beneficial owner is the one who pays the tax, and that HMRC looks at whether a Form 17 declaration has been made, who provided the cost and who received the sale proceeds. If the proceeds simply go back to the original owner, HMRC may argue the gift was never effective. The recipient should hold the asset outright, with no condition that it be returned.

Timing also counts. For capital gains purposes an asset sold under an unconditional contract is disposed of when contracts are exchanged (section 28; CG22410), so a transfer to a spouse should be completed before you agree a sale, not afterwards.

Moving income producing assets also shifts the income. Outright gifts between spouses of assets carrying full rights are generally outside the income tax settlements rules, but restricted gifts are not; see the settlements legislation and spouse shareholdings. For jointly held property, the income tax 50:50 rule and Form 17 are explained in jointly owned rental property.

What happens to private residence relief on a transfer of a home?

Section 222(7) says that where one partner living with the other disposes of a dwelling house, or an interest in it, to the other, including by legacy on death, the recipient’s period of ownership begins when the transferor’s began. Any part of that earlier period when the house was the transferor’s only or main residence counts as if it were also the recipient’s. The same look through applies to the shared occupancy test for lettings relief under section 223B(5).

A couple living together can only have one main residence between them for private residence relief (section 222(6)), so a transfer cannot create a second exempt home.

Do I need to report a transfer to my spouse?

A no gain no loss transfer produces no gain, so no tax arises on it. For UK residential property, a disposal on which neither a gain nor a loss accrues because of the no gain no loss provisions is an excluded disposal, so no 60 day return is required for the transfer itself (Finance Act 2019, Schedule 2, paragraph 1(2)(a)). The recipient must keep a record of the original cost: GOV.UK says the recipient’s gain is based on the difference between the value when the transferor first owned the asset and the disposal value, and that they should keep a record of what the transferor paid. When the recipient later sells a UK home or other residential property at a gain, the normal 60 day property return applies to them.

What happens if we separate?

For disposals on or after 6 April 2023, the no gain no loss treatment continues for a limited period after a couple stop living together, and without time limit for transfers under a formal divorce agreement or court order (section 58(1C) and (1D)). The rules, and the treatment of the former family home, are covered in capital gains tax on separation and divorce.

What are the common mistakes?

  • Transferring after exchange of contracts with a buyer, when the disposal has already happened.
  • Paying the sale proceeds back into the original owner’s account, undermining the gift.
  • Assuming a couple can each have a main residence while living together.
  • Forgetting that the recipient inherits the transferor’s low base cost, so the deferred gain is still there.
  • Assuming no gain no loss treatment applies to trading stock.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.