Disclaimer: This article is intended as an informative piece. This is not accounting or tax advice. Please speak to a qualified tax professional about your specific circumstances before acting upon any of the information in this article.
This is a legal way to offset capital gains on cryptocurrencies by using your partner’s annual capital gains exemption (£3,000 for the 2024/25 tax year) if they do not already use it. However, there are various rules surrounding this, so we advise speaking to a qualified tax professional before doing this to ensure you are eligible.
Introduction
For ease of reading, all references below to spouses, also includes civil partners; because civil partners are considered the same as spouses for tax purposes.
When a cryptoasset is transferred between two spouses, there is a disposal by the transferor spouse and an acquisition by the transferee spouse for capital gains tax purposes.
The disposal is deemed to take place at ‘no-gain and no-loss’ provided the couple is:
married or in civil partnership, and
living together during the tax year
In Scotland, a ‘common-law’ marriage is recognised as a legal marriage once there has been a declaration before the Court of Session. Disposals between such a couple are also deemed to take place at no-gain and no-loss.
A couple does not have to be physically living in the same house to be ‘living together’. As long as the marriage or civil partnership has not broken down, the couple are treated as living together for capital gains tax purposes even if they have separate homes.
This disposal proceeds used in the capital gains calculation is a balancing figure and it is equal to the costs of acquisition, plus enhancement expenditure, plus incidental costs of sale.
The transferee spouse’s base cost is the deemed proceeds figure used in the capital gains calculation. This is the deemed cost of acquisition for the transferee spouse.
Any consideration paid by the transferee is ignored and the no-gain and no-loss rules are still used. There is nothing in the legislation to disapply the no-gain and no-loss rules where the spouses are married and living together but one spouse is non-resident in the UK.
Separation and divorce
This no-gain and no-loss treatment applies until the end of the tax year in which the couple separate. Individuals who are married or in civil partnership are treated as living together unless they separate:
under an order of a court
by a deed of separation, or
in circumstances where the separation is likely to be permanent
For example, if a couple permanently separate during the 2018/19 tax year, any transfers between them up until 5 April 2019 will take place at no-gain and no-loss. As the couple does not live together in 2019/20, any transfer of assets must take place at market value since they are ‘connected person’. Any consideration paid is ignored. The fact that the couple may still be legally married is irrelevant.
Exceptions to the rule
The no-gain and no-loss rule does not apply where:
the transfer is made on the death bed (the transferee spouse is treated as a legatee)
the asset transferred formed part of the trading stock of the transferor spouse
the asset transferred forms part of the transferee spouse’s trading stock
Transfers to and from trading stock are deemed to take place at market value. This would be applicable if an individual is engaging in financial trading in cryptoassets and transfers the assets into or from the trading stock of this business.
This is a complex area and we recommend you seek help from a qualified tax professional if this may be applicable to you.
Reporting
The transfer of the asset between spouses has to be reported on the transferor spouse’s tax return if they have other chargeable gains that need reporting on the Tax Return. This would be the case if the total disposal proceeds exceed four times the annual exempt amount, or if the net chargeable gains exceed the annual exempt amount. In the current tax year 2024/25, gains need to be reported on the Tax Return if the gains exceed £3,000, or if the total proceeds of all disposals exceed £50,000.
All capital losses should be reported, as it is the only way they can be ‘claimed’ to use against future gains. A detailed calculation also needs to be submitted, as with any other disposal.
However, even if no reporting is required, it is still good practice to disclose the no gain and no loss transfer on the Tax Return of both the transferor and transferee spouse as it may help avoid a later HMRC investigation.
How to account for spouse transfers in Recap
You can account for spouse transfers in Recap by either using the Activity screen or by importing transactions into a Custom Account via a CSV file.
Using the activity screen:
Navigate to the Activity screen and click the +Add Transaction button in the top right corner.
From the transaction type dropdown menu, select either Receive Gift (Spouse) or Send Gift (Spouse) then choose the appropriate account to add the transaction to using the Account dropdown menu. Click Next.
Enter the required details, including date and the amount of the gift.
Note that for Receive Gift (Spouse) transactions, you must also enter the Gift Value—this is the original amount your spouse paid for the asset, including allowable costs, which will become the acquisition cost. If your spouse is using Recap, this amount can be found in the 'Gift Disposals' section of their downloadable CGT report.
Click Next to add the transaction to Recap.
Using a custom account:
Prepare Your CSV File by following the detailed instructions in our custom account guide.
Import Your CSV File:
Sign in to Recap and go to the 'Accounts' screen.
Click the 'Add Account' button.
Choose 'Custom' and press 'Next'.
Give the account a name (you can change this later).
Scroll to your new account, press the cog icon, and choose 'Import Recap CSV'.
Select the file and press 'Import'.
Example transaction for sending a Spouse gift:
Type | Date | OutOrSellAmount | OutOrSellCurrency | FeeAmount | FeeCurrency |
Spouse | 2019-12-25T12:22:22Z | 0.1 | BTC | 0.0001 | BTC |
Example transaction for receiving a spouse Gift:
Type | Date | InOrBuyAmount | InOrBuyCurrency | ValueAmount
| ValueCurrency |
Spouse | 2022-05-28T08:23:32Z | 400 | ADA | 140 | GBP |
Note: You must always set the acquisition cost when receiving a spouse gift by using the ValueAmount and ValueCurrency fields in your custom CSV as shown above.
For example, if your spouse gifts you 400 ADA they bought for 140 GBP, you would use 140 in the ValueAmount column and GBP in the ValueCurrency column.
Need to sort out your crypto taxes? Use Recap, the privacy focused cryptocurrency accounting software to calculate the taxable gain or loss on your cryptocurrency investments!