Can I use my spouse’s allowance to cut my Capital Gains Tax?

This guide explains how married couples can use spousal transfers and allowances to reduce Capital Gains Tax including joint allowances, tax band planning and no gain no loss rules.

At Towerstone, we provide specialist capital gains accountancy services for couples planning asset sales. We have written this article to explain how allowances can be used together, helping you make informed decisions.

In my experience, this is one of the smartest and most underused questions people ask about Capital Gains Tax. It usually comes up when someone has made a decent profit on shares, property, or cryptocurrency and suddenly realises that the tax bill could be far larger than expected. Quite naturally, the next thought is, “my spouse has allowances too, can I use them?”

In short, yes, in many situations you can use your spouse’s Capital Gains Tax allowance to reduce the overall tax bill. However, and this is important, it only works if it is done correctly and in line with UK tax rules. Done properly, it is entirely legitimate tax planning. Done badly, it can lead to HMRC challenges, unexpected tax, and a lot of stress.

In this article I am going to explain, from experience and in plain UK English, how using a spouse’s allowance actually works, when it is allowed, when it is not, and how to apply it in real life. Everything here is grounded in current UK rules and the approach taken by HM Revenue and Customs and guidance published on GOV.UK.

This is intentionally detailed. In my opinion, spouse transfers are one of the most powerful and misunderstood Capital Gains Tax planning tools available to couples.

The Short Answer Up Front

Yes, you can often use your spouse’s Capital Gains Tax allowance to reduce the total tax paid by transferring assets to them before disposal.

Key words there are before disposal.

You cannot simply decide after the gain has arisen to “share” it with your spouse. Timing and structure matter.

From experience, when this is done properly, it is completely acceptable. When it is done after the event, it usually fails.

Why Spouses and Civil Partners Are Treated Differently

UK tax law gives special treatment to married couples and civil partners who are living together.

For Capital Gains Tax purposes:

  • Transfers between spouses or civil partners are generally no gain, no loss

  • This means no Capital Gains Tax is paid at the time of transfer

  • The recipient spouse takes over the original cost base of the asset

In my opinion, this rule exists because the tax system broadly treats married couples as a single economic unit in certain contexts.

What Does “No Gain, No Loss” Actually Mean?

This phrase causes a lot of confusion, so let me explain it simply.

If you transfer an asset to your spouse:

  • There is no Capital Gains Tax charge at the time of transfer

  • HMRC treats it as if the asset was transferred at its original cost

  • The gain is effectively deferred, not wiped out

From experience, people sometimes think “no gain, no loss” means the gain disappears. It does not. It simply moves to the other spouse.

How This Helps Reduce Capital Gains Tax

The benefit comes when the asset is eventually sold.

Each individual has:

  • Their own Capital Gains Tax annual allowance

  • Their own income tax bands, which affect CGT rates

By spreading ownership across two people, you can often:

  • Use two CGT allowances instead of one

  • Keep more gains taxed at the lower CGT rate

  • Reduce the overall tax bill substantially

In my opinion, this is one of the cleanest forms of tax planning available.

A Simple Example From Experience

Let’s say you own shares that will generate a £40,000 gain when sold.

If you sell them all yourself:

  • Only one CGT allowance is available

  • The rest is taxed at 10 percent or 20 percent depending on your income

If instead you transfer half the shares to your spouse before selling:

  • You each realise a £20,000 gain

  • You each get a CGT allowance

  • Potentially much more of the gain is taxed at 0 percent or 10 percent

From experience, this kind of planning can save thousands in tax.

Timing Is Everything

This is where most people go wrong.

To use your spouse’s allowance:

  • The asset must be transferred before the disposal

  • The transfer must be genuine

  • Your spouse must actually own the asset when it is sold

You cannot:

  • Sell the asset yourself

  • Then decide to “allocate” part of the gain to your spouse

  • Or backdate ownership

In my opinion, HMRC is very alert to after the fact planning.

What Assets Can Be Transferred to a Spouse?

In practice, most capital assets can be transferred between spouses.

Common examples include:

  • Shares and investments

  • Cryptocurrency

  • Buy to let property

  • Land

  • Certain business assets

From experience, listed shares and crypto are often the easiest to plan with because transfers are straightforward.

Using a Spouse’s Allowance With Shares and Investments

This is one of the most common uses of spouse transfers.

The process usually looks like this:

  • Transfer some or all shares to your spouse

  • Wait until legal ownership has passed

  • Sell the shares in both names

  • Each spouse reports their own gain

From experience, this works very smoothly when done properly.

Using a Spouse’s Allowance With Cryptocurrency

Crypto is increasingly where this planning is used.

Because:

  • Crypto transfers between spouses are no gain, no loss

  • Crypto is divisible

  • Transfers are quick and inexpensive

Couples can:

  • Move tokens between wallets

  • Spread future disposals across two people

  • Use two CGT allowances

In my opinion, crypto is particularly well suited to this type of planning, provided records are kept properly.

Property and Spouse Transfers

Property is more complex but still possible.

If you own a property jointly or transfer part of it to your spouse:

  • The no gain, no loss rule can apply

  • Ownership proportions matter

  • Legal and mortgage issues must be considered

From experience, this is where people should slow down and take advice, especially if a mortgage is involved.

Does Stamp Duty Apply on Transfers Between Spouses?

This is a common concern.

In many cases:

  • Transfers between spouses are exempt from Stamp Duty Land Tax

  • However, mortgage debt can change this

From experience, property planning must consider CGT, SDLT, and practical ownership issues together.

Income Levels and CGT Rates

Using a spouse’s allowance is not just about the allowance itself.

CGT rates depend on income.

For most assets:

  • Basic rate taxpayers pay CGT at 10 percent

  • Higher rate taxpayers pay CGT at 20 percent

If one spouse has lower income:

  • More gains may fall into the 10 percent band

  • This can reduce tax even further

In my opinion, this is where the biggest savings often arise.

When Spouse Transfers Do Not Work

There are situations where spouse transfers are not effective.

Common examples include:

  • Transfers made after contracts are exchanged

  • Transfers where the spouse is not genuinely the owner

  • Couples who are separated or not living together

  • Assets already sold or disposed of

From experience, HMRC challenges usually focus on timing and substance.

Living Together Requirement

The no gain, no loss rule generally applies only if spouses or civil partners are living together.

If you are:

  • Separated

  • In the process of divorce

  • Living permanently apart

Different rules can apply.

In my opinion, this is an area where assumptions are risky.

Can Unmarried Couples Do This?

No.

This is important to be clear about.

The no gain, no loss rule applies only to:

  • Married couples

  • Civil partners

Unmarried couples cannot transfer assets without triggering CGT.

From experience, this often surprises people, but the rule is strict.

Record Keeping Is Critical

Whenever you use spouse transfers, records matter.

You should keep:

  • Evidence of the transfer

  • Dates of transfer

  • Original acquisition costs

  • Valuations where relevant

From experience, good records prevent arguments later.

How Gains Are Reported

Each spouse reports their own gain on their own Self Assessment return.

This includes:

  • Their share of proceeds

  • Their share of costs

  • Their own allowances and losses

There is no “joint” CGT return.

In my opinion, this separation is simple but often overlooked.

Common Mistakes I See in Practice

From experience, the most common errors include:

  • Transferring assets too late

  • Forgetting the living together rule

  • Assuming income splitting applies automatically

  • Poor documentation

  • Mixing up beneficial and legal ownership

Each of these can invalidate the planning.

HMRC’s View on Spouse Planning

It is worth saying this clearly.

HMRC fully accepts spouse transfers when they are done properly.

This is not aggressive tax avoidance.

It is a long established part of UK tax law.

From experience, HMRC challenges usually arise only when people try to stretch the rules after a gain has already arisen.

Using Spouse Allowances Year After Year

This is not a one off trick.

Couples can:

  • Plan disposals across multiple tax years

  • Use two allowances each year

  • Gradually reduce exposure to CGT

In my opinion, long term planning is far more powerful than last minute fixes.

Interaction With Capital Losses

Spouse transfers can also work alongside losses.

For example:

  • One spouse may have carried forward losses

  • Assets can be sold in the most tax efficient combination

From experience, combining allowances and losses can dramatically reduce tax.

When Professional Advice Is Worthwhile

In my opinion, advice is especially valuable where:

  • Large gains are involved

  • Property is being transferred

  • Crypto or complex assets are involved

  • One spouse has significantly different income

The cost of advice is usually small compared to the tax at stake.

Practical Steps I Recommend From Experience

If you are thinking about using your spouse’s allowance, I recommend:

  • Reviewing who owns the asset now

  • Transferring ownership well before sale

  • Checking both spouses’ income positions

  • Keeping clear records

  • Modelling the tax outcome before acting

These steps prevent rushed mistakes.

Key Takeaways

So can you use your spouse’s allowance to cut your Capital Gains Tax? Yes, absolutely, and in my opinion it is one of the most effective and legitimate CGT planning tools available to couples.

From experience, the biggest savings come not from clever tricks but from understanding the rules early and acting in good time. The biggest failures come from trying to fix the tax bill after the gain has already happened.

If there is one takeaway, it is this: spouse allowances do not apply automatically. They must be planned for. Done properly, they can save significant amounts of tax. Done carelessly, they do nothing at all.

In my opinion, for married couples and civil partners with valuable assets, ignoring this planning opportunity is one of the biggest missed opportunities in Capital Gains Tax.

If you would like to explore related Capital Gains Tax guidance, you may find Do companies pay Capital Gains Tax or Corporation Tax on assets and Do I have to pay Capital Gains Tax on inherited property useful. For broader Capital Gains Tax guidance, visit our Capital Gains Tax hub.