Tax Implications of Transferring Shares to a Spouse or Partner (UK Guide)

If you’re a shareholder in a UK company, transferring shares to your spouse or civil partner can be an effective way to split income and reduce tax liabilities. But it’s important to understand the rules and possible tax implications before you go ahead.

This guide explains how transferring shares to a spouse works, what taxes you may (or may not) have to pay, and how to do it properly under UK tax law.

Why Transfer Shares to a Spouse or Partner?

Many UK business owners consider transferring shares to their spouse or civil partner as a practical way to manage their family’s tax position more efficiently and plan for the future.

Income Tax Efficiency

One of the main reasons is to make use of both partners’ tax-free allowances and income tax bands. Every individual in the UK has an annual Personal Allowance that can be used against income, including dividends. By spreading company shares between you and your spouse, you can ensure that both allowances are fully used potentially saving thousands in tax each year.

Check the latest Personal Allowance rates

Using Lower Tax Bands

When only one spouse owns all the shares and is a higher or additional rate taxpayer, dividends can attract higher tax rates. By transferring some shares to a spouse or civil partner who has little or no other income, more dividend income can be taxed at the basic rate or may even fall within the tax-free Dividend Allowance.

Read the HMRC guide to dividend tax

Family and Succession Planning

Transferring shares can also help with succession planning, especially in family businesses. It allows spouses or civil partners to become shareholders and have a stake in the company’s future. This can make passing the business on to the next generation smoother and more tax-efficient.

Favourable Rules for Married Couples

UK tax law is particularly supportive of married couples and civil partners. Transfers of assets, including shares, between spouses or civil partners are generally exempt from Capital Gains Tax (CGT), provided the transfer is a genuine gift. This favourable treatment does not apply to unmarried couples, where transfers may trigger immediate tax liabilities.

Understand CGT and gifting to a spouse

In summary, transferring shares to a spouse or civil partner is a tried-and-tested way for many company owners to reduce tax, optimise family income, and strengthen long-term planning — but it must be done carefully and properly documented to meet HMRC rules.

Are There Capital Gains Tax Implications?

One of the biggest advantages of transferring shares to your spouse or civil partner is that, under UK tax law, these transfers are normally exempt from Capital Gains Tax (CGT). This is a special relief that only applies to married couples and civil partners not to unmarried partners, no matter how long you’ve been together.

How the CGT Spousal Exemption Works

When you transfer shares to your spouse or civil partner as a genuine gift, there is no immediate CGT bill. The law treats the transfer as a ‘no gain, no loss’ disposal. This means the shares pass to your spouse at the same base cost you paid when you originally acquired them.

Example:

• You bought shares for £5,000.
• They’re now worth £50,000.
• You transfer them to your spouse as a gift.
• No CGT is due now.
• If your spouse later sells them for £60,000, their gain will be based on the original cost (£5,000) and the date you first acquired them not the value when you transferred them.

This is known as spousal holdover relief, and it can be very effective for household tax planning. However, the receiving spouse should be aware that the base cost carries forward, which could result in a larger gain (and CGT liability) if they sell the shares in the future.

Learn more about gifting assets to your spouse and CGT rules

Genuine Gift – Not a Sale

For the exemption to apply, the transfer must be a genuine gift. If you sell the shares to your spouse for cash (even £1), the ‘no gain, no loss’ rule does not apply instead, normal CGT rules will. This means HMRC will calculate any gain based on the market value of the shares at the time of the transfer, which can result in an unexpected CGT bill.

The same applies if there are conditions attached that mean the gift isn’t unconditional  so it’s important to handle this correctly.

Transfers to Unmarried Partners

It’s also vital to note that unmarried couples do not benefit from this CGT exemption. If you transfer shares to an unmarried partner, HMRC treats this as a disposal at market value, which can trigger an immediate CGT charge if the shares have increased in value since you bought them.

Check if your gift could trigger CGT

Planning Ahead

Because CGT rules can be complex, it’s wise to seek professional tax advice from an accountant if you’re planning to transfer significant shares, especially if there are other factors like trusts, family companies, or complicated share structures involved.

Key takeaway: For married couples and civil partners, transferring shares can be a powerful way to defer or reduce CGT, but only if the transfer is done properly and the paperwork is clear.