Capital Gains tax on transfer of investment property by spouse

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Many thanks in advance for any responses.

My wife and I are considering purchasing an investment property to renovate and sell (hopefully to make a profit!). Due to her circumstances, my wife has to financially exit the property on or before end of tax year 25/26 (we have not bought it yet). Hence she may have to transfer her financial interest in the property shortly prior to that date if we haven't sold the property by then. I am not sure how my CGT will be calculated if she transfers her interest to me on 30/3/26.

Using the following example figures, what would the CGT be for myself if her interest is transferred to me even though all expenses were incurred jointly

Bought £100,000

Expenses £60,000

Sold £240,000
Total capital gain £80,000
If sold before 30/3/26 - capital gain £40,000 each.

After transfer of property is my capital gain £80,000?
Is it still £40,000?
or can I only use half of the expenses so capital gain is £80,000 plus £30,000 so £110,000?

Just to be clear - this is not divorce or separation issue.

Many thanks in advance.

It’s £80,000. Transfers between spouses are cgt free and you are taken to have acquired the asset (or share of the asset) that they did.

such transfers were useful both to take advantage of a spouses tax free allowance and lower tax rate. The former has pretty much gone now but the latter may apply to you depending on both of your other income.

Also don’t forget when doing your planning that cgt rates may be considerably higher in a months time than they are now…..

Thanks for your message,

I am very much aware that the cgt rates are likely to go up considerably.

CGT may not apply at all. You may be liable to income tax instead if the intention on acquisition is to sell for a profit; see Condition A in para 4. You only need to be within one of these conditions to be caught. The rules are within Income Tax Act 2007 and override the CGT treatment. They deem that you are carrying out a trade - ie a deemed trade, not an actual trade so you cannot shelter the disposal profits or capital gains by making pension contributions.

Note that under 2(a) to (c) your wife can also be taxed on a proportion of the profits as a 'provider of the opportunity'. As this is a deeming provision, it may not affect her need to financially exit the property before March 2026, unless she need to suppress her level of statutory income.

517BDisposals of land in the United Kingdom

(1)Section 517C(1) applies (subject to subsection (3) of that section) if—
(a)a person within subsection (2)(a), (b) or (c) realises a profit or gain from a disposal of any land in the United Kingdom, and
(b)any of conditions A to D is met in relation to the land.

(2)The persons referred to in subsection (1) are—
(a)the person acquiring, holding or developing the land,
(b)a person who is associated with the person in paragraph (a) at a relevant time, and
(c)a person who is a party to, or concerned in, an arrangement within subsection (3).

(3)An arrangement is within this subsection if—
(a)it is effected with respect to all or part of the land, and
(b)it enables a profit or gain to be realised—
(i)by any indirect method, or
(ii)by any series of transactions.

(4)Condition A is that the main purpose, or one of the main purposes, of acquiring the land was to realise a profit or gain from disposing of the land.

(5)Condition B is that the main purpose, or one of the main purposes, of acquiring any property deriving its value from the land was to realise a profit or gain from disposing of the land.

(6)Condition C is that the land is held as trading stock.

(7)Condition D is that (in a case where the land has been developed) the main purpose, or one of the main purposes, of developing the land was to realise a profit or gain from disposing of the land when developed.