Can I reduce my Capital Gains Tax bill by splitting assets with my other half?

At a glance:

• Selling an asset can mean you need to pay Capital Gains Tax (CGT) on any gain you make.
  
• You have several tax-efficient options that can reduce your CGT, including splitting or gifting assets to your spouse or civil partner.
  
• Whether you give away assets to your spouse or civil partner or do something entirely different, we can help guide you through the complex rules surrounding CGT.

Thinking of selling a second property? Cashing in a share portfolio? Or even selling some unwanted valuables you’ve inherited? When you sell an asset that’s gone up in value since you acquired it, you may have to pay CGT on your profits.

It can feel like a bitter pill for someone who made a wise investment some years back and has seen it grow in value – only to hand a sizable percent back to the government.

However, you may have more options than you think to mitigate a high CGT bill.

Splitting your assets can reduce your CGT bill

One possible way of reducing CGT is by giving an asset away to your spouse or civil partner, or splitting it with them. By doing this, both of you are able to use your individual CGT allowance to bring down the amount of tax you’ll pay.

Read on to find out how splitting your assets can help you get on top of CGT. But first, since most of us are only likely to find ourselves liable for CGT a handful of times in our lives, we’ll run over the basics of this tax.

What is Capital Gains Tax?

CGT is a tax payable on the profit or gain you make when you sell something that’s increased in value since you acquired it. It’s not a tax on the whole amount, just on the profit you make. If you sell or gift certain assets and your overall profit is above the annual CGT allowance (see below), you’ll need to pay CGT.

Assets that you might pay CGT on include shares that aren’t part of an ISA or pension (both CGT exempt); business assets; personal possessions worth more than £6,000; and property that isn’t your main home. That could include a second home, a buy-to-let rental, or even a house or room that’s only occasionally occupied.

Has the rate of Capital Gains Tax changed?

CGT was, as anticipated, targeted by the Chancellor in her Autumn Budget, and the increase in Capital Gains Tax was one of the steepest for investors. New rates for disposing of assets other than property rose from 10% to 18% for basic rate taxpayers, and from 20% to 24% for higher or additional rate taxpayers. This change took effect immediately.

The rates for disposing of property remained unchanged.

How much CGT will I pay?

How much CGT you pay depends on your income bracket, and the value of the asset you’re selling or giving away.

If you pay basic-rate tax, you’ll pay 18% CGT on disposing of assets, whether residential property, investments or valuables. Higher and additional rate taxpayers pay 24% on any gains above the annual allowance. However, if your gains tip you into the higher-rate tax threshold, you may pay tax at both rates.

If you’re selling all or part of your trading business – and you’ve had the business for two years – you may be eligible for a special rate of 10%. This is known as Business Asset Disposal Relief (BADR), which is set to increase to 14% in April 2025. Our Business Advisory Services can guide you through this critical moment for your business.

What is the Capital Gains Tax allowance?

The CGT allowance for 2025-26 remains £3,000 per individual. Therefore, £3,000 is the maximum profit you can make on the sale of chargeable assets this tax year before you have to pay CGT.

As far as CGT is concerned, if you are living with a spouse or a civil partner, you each currently have a £3,000 tax-free annual allowance, giving you a £6,000 tax-free buffer if you sell a jointly-owned asset, or one that you’ve already split between you.

Your CGT allowance resets each year. So if, for example, you’re considering selling an asset other than property, such as shares, you could split the sale over two years and take advantage of two years’ worth of allowance. However, do be aware that if you don’t use your allowance one year, you can’t carry it forward.

Can gifting assets to my spouse or civil partner cut our CGT bill?

Married couples or those in a civil partnership can maximise their Capital Gains allowances by splitting assets between them. Such a transfer must be on an outright and unconditional basis. Splitting assets allows you to double your tax-free CGT allowance – and you may reduce or avoid paying CGT altogether.

This only applies to individuals who are married, in a civil partnership and living together. If you are living together, even in a long-term relationship, but not married or in a civil partnership and you give an asset to your partner, there may be CGT to pay.

Splitting assets is a neat and legitimate means of reducing your CGT liability. Do be aware that, once you’ve given that asset away, your spouse or civil partner will become its legal owner. Therefore, give consideration to the possibility of relationships breaking down before splitting assets. If, for any reason, your relationship breaks down and you separate or divorce, you cannot ask for the asset back.

Are there other ways to cut my CGT bill?

Splitting your assets isn’t your only option to reduce CGT. You could:

• Stagger the sale of assets over several tax years. You could sell part of a share portfolio on 3 April and the rest on 6 April to take advantage of two years’ CGT allowance.
• Offset any losses you’ve made on other assets against your gain. So, if you have a share portfolio or family heirloom that sold at a loss, for example, you can use that to reduce the taxable gain against another asset you’re selling, such as property. Special rules apply when it comes to offsetting losses, so do check with a financial adviser.
• Invest your assets in an ISA or pension – sheltering them from tax. You might want to consider a Bed and ISA – this is where you sell shares (the Bed part) and buy them back within an ISA wrapper to shelter them from future gains. Always speak to a financial adviser if you’re considering this option, to make sure it’s the right choice for you.

How we can help with CGT

Knowing the best, most tax-efficient way to dispose of a diverse portfolio of assets can be as important as building them up in the first place. CGT is a complicated area of tax-planning. Some people pay, who could have mitigated some or all of the tax, while others forget to declare gains, and may even face fines.

Which is why it’s wise to get your head around CGT and take financial advice, so you don’t end up paying more than you need to.

We’ll help you make the most tax-efficient choices, and plan for your future.

The value of an investment with St. James's Place will be directly linked to the performance of the funds you select, and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief is generally dependent on individual circumstances.

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