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 a smart way to balance your household income, make use of both partners’ tax allowances, and potentially reduce your overall tax bill. However, HMRC applies very specific rules to share transfers between spouses, and getting it wrong can lead to unexpected Capital Gains Tax (CGT), Dividend Tax, or even settlement rules issues.

That’s why it’s vital to understand exactly how the tax rules work, when a transfer is genuinely tax-free, and what steps you must take to stay fully compliant. In this guide, you’ll learn how HMRC treats transfers between spouses, the key tax implications to watch for, and the practical steps required to document the transfer correctly under UK law.

Why this matters

Transferring shares is one of the most common ways for owner-managed businesses to share dividends more efficiently but HMRC regularly scrutinises poorly structured transfers. This guide gives you a clear, up-to-date overview, backed by authoritative sources and practical examples.

Helpful HMRC resources (for further reading)

• HMRC Guidance: Gifts Hold-Over Relief & Spousal Transfers
• HMRC: How Dividend Tax Works
• HMRC Settlements Manual (income shifting rules)
• Guidance on restrictions if shares attract relief (EIS/SEIS)

Expert tips before you start

• Always transfer beneficial ownership, not just share certificates. HMRC only recognises a transfer if your spouse genuinely owns the rights to dividends and voting power.
• Update your company’s statutory records immediately. This includes the register of members and notifying Companies House on the next confirmation statement (CS01).
• Put a simple share transfer agreement in writing. This protects both parties and makes HMRC enquiries much easier to handle.
• Check if your company is caught by the settlements legislation. Higher-rate taxpayers transferring shares to lower-rate spouses must ensure the transfer is unconditional and carries voting rights.
• Consider getting a share valuation. This is especially helpful if your company has grown significantly, as HMRC may challenge “peppercorn” or undervalued transfers.

With the right structure and documentation, transferring shares to a spouse can be one of the most tax-efficient moves you make. Let’s break down exactly how it works and how to avoid the pitfalls.

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 support long-term planning. When done correctly, it can unlock powerful tax efficiencies while keeping you fully compliant with HMRC requirements.

Income Tax Efficiency

One of the key drivers is the ability to use both partners’ tax-free allowances and income tax bands. Every individual in the UK receives a Personal Allowance that can be applied to income, including dividends. If one spouse owns all the shares, their dividends alone may exceed their allowance and push them into higher tax bands.

By splitting share ownership, you can ensure that both partners’ allowances are fully utilised, often saving families thousands in tax annually.

Check the latest Personal Allowance rates

Using Lower Tax Bands

If one spouse is a higher-rate or additional-rate taxpayer, all dividend income they receive from the company may be taxed at 33.75% or even 39.35%. Transferring a portion of the shares to a partner with little or no other income can allow dividend income to fall into the basic-rate band – or even within the tax-free Dividend Allowance.

This is one of the most common and effective – strategies used by owner-managed businesses to legitimately reduce household tax.

Read the HMRC guide to dividend tax

Family and Succession Planning

Share transfers aren’t just about tax – they also form a key part of succession and estate planning. Bringing your spouse or civil partner in as a shareholder can help strengthen the long-term stability of the business and create a smoother path for transferring ownership to children or future generations.

This is especially relevant for family-run businesses where continuity and shared control matter. Properly structured transfers can also support later Inheritance Tax planning, including potential access to Business Relief.

Favourable Rules for Married Couples

UK tax legislation is generous towards married couples and civil partners. Transfers of assets – including shares – between spouses are usually treated as no-gain, no-loss for Capital Gains Tax (CGT) purposes, provided the transfer is an outright gift and isn’t made in expectation of divorce or separation.

However, this treatment does not apply to unmarried partners. For couples who aren’t married or in a civil partnership, transferring shares may trigger immediate CGT liabilities, especially if the company has grown in value.

For a full breakdown of how CGT works on business assets, see our guide: Capital Gains Tax Guide for Small Businesses.

Compliance reminder: Even though CGT doesn’t apply between spouses, you must still document the transfer properly and update the company’s statutory registers.

In summary: Transferring shares to a spouse or civil partner is a well-established and highly effective strategy for reducing tax, optimising family income, and supporting succession planning. But HMRC expects the process to be genuine, transparent, and correctly documented – so it’s essential to follow the rules carefully.

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 support long-term planning. When done correctly, it can unlock powerful tax efficiencies while keeping you fully compliant with HMRC requirements.

Income Tax Efficiency

One of the key drivers is the ability to use both partners’ tax-free allowances and income tax bands. Every individual in the UK receives a Personal Allowance that can be applied to income, including dividends. If one spouse owns all the shares, their dividends alone may exceed their allowance and push them into higher tax bands.

By splitting share ownership, you can ensure that both partners’ allowances are fully utilised, often saving families thousands in tax annually.

Check the latest Personal Allowance rates

Using Lower Tax Bands

If one spouse is a higher-rate or additional-rate taxpayer, all dividend income they receive from the company may be taxed at 33.75% or even 39.35%. Transferring a portion of the shares to a partner with little or no other income can allow dividend income to fall into the basic-rate band – or even within the tax-free Dividend Allowance.

This is one of the most common and effective – strategies used by owner-managed businesses to legitimately reduce household tax.

Read the HMRC guide to dividend tax

Family and Succession Planning

Share transfers aren’t just about tax – they also form a key part of succession and estate planning. Bringing your spouse or civil partner in as a shareholder can help strengthen the long-term stability of the business and create a smoother path for transferring ownership to children or future generations.

This is especially relevant for family-run businesses where continuity and shared control matter. Properly structured transfers can also support later Inheritance Tax planning, including potential access to Business Relief.

Favourable Rules for Married Couples

UK tax legislation is generous towards married couples and civil partners. Transfers of assets – including shares – between spouses are usually treated as no-gain, no-loss for Capital Gains Tax (CGT) purposes, provided the transfer is an outright gift and isn’t made in expectation of divorce or separation.

However, this treatment does not apply to unmarried partners. For couples who aren’t married or in a civil partnership, transferring shares may trigger immediate CGT liabilities, especially if the company has grown in value.

For a full breakdown of how CGT works on business assets, see our guide: Capital Gains Tax Guide for Small Businesses.

In summary: Transferring shares to a spouse or civil partner is a well-established and highly effective strategy for reducing tax, optimising family income, and supporting succession planning. But HMRC expects the process to be genuine, transparent, and correctly documented – so it’s essential to follow the rules carefully.

Are There Capital Gains Tax Implications?

One of the biggest advantages of transferring shares to your spouse or civil partner is that UK tax law provides a powerful relief: these transfers are normally exempt from Capital Gains Tax (CGT). This generous treatment applies only to married couples and civil partners. Unmarried partners, regardless of how long they’ve been together, are taxed very differently.

Understanding how this exemption works and when it doesn’t apply – is crucial for staying compliant and avoiding unexpected tax bills.

How the CGT Spousal Exemption Works

When you transfer shares to your spouse or civil partner as a genuine, unconditional gift, the transfer is treated as a “no gain, no loss” disposal. In practical terms, this means:

• No immediate CGT charge, regardless of the current value of the shares.
• Your spouse inherits your original base cost (the amount you paid when you acquired the shares).
• The gain is only calculated when the receiving spouse eventually sells the shares.

This mechanism is often referred to as a spousal holdover relief and it’s a cornerstone of tax-efficient planning for owner-managed businesses.

Example:

• You bought shares for £5,000.
• Their market value has grown to £50,000.
• You transfer all shares to your spouse as an outright gift.
• No CGT is payable at the point of transfer.
• If your spouse later sells the shares for £60,000, their gain is calculated from the original £5,000 cost.

This structure defers tax rather than eliminates it entirely, so the receiving spouse should be aware that any future sale may trigger a larger CGT liability.

Learn more about gifting assets to your spouse and CGT rules

Genuine Gift – Not a Sale

For the CGT exemption to apply, the transfer must be an outright gift. If you sell the shares to your spouse for anything – even £1 – the relief does not apply. Instead, HMRC will deem the disposal to have taken place at market value, and normal CGT rules will apply.

This means that:

• If the shares have increased in value, you could trigger an unexpected CGT bill.
• Transfers with conditions, restrictions, or deferred ownership also risk falling outside the exemption.
• “Paper sales” or artificially low consideration are routinely challenged by HMRC.

Transfers to Unmarried Partners

Unlike married couples or civil partners, unmarried partners do not qualify for the no gain, no loss CGT treatment. HMRC automatically applies the market value rule to any share transfer.

This means that if the shares have risen in value since you bought them, you could face an immediate CGT charge – even if no money changes hands.

Check if your gift could trigger CGT

Planning Ahead

CGT planning can become complex quickly, especially when dealing with:

• family-owned companies
• alphabet share structures
• trusts or inherited shares
• shares with Entrepreneurs’ Relief/Business Asset Disposal Relief history
• valuation disputes

If you’re planning a high-value or strategically important transfer, it’s wise to speak with a specialist accountant. They can confirm eligibility, help prepare paperwork, and ensure your company’s statutory records and Companies House filings are correctly updated.

Key takeaway: For married couples and civil partners, transferring shares can significantly reduce or defer CGT but only when the transfer is a genuine gift, properly documented, and backed by clear evidence. Getting the details wrong can lead to avoidable tax bills.