What triggers Capital Gains Tax

Disposal means more than selling

A disposal happens whenever an asset leaves your ownership. Selling is the obvious case, but several others catch people who never received any money.

Gifts are the trap

Giving an asset away is treated as a disposal at market value, so you can owe tax on a gain when no money changed hands at all. A parent gifting a rented flat to a child creates a taxable gain for the parent, who then has to fund the tax from elsewhere.

The one broad exception is transfers between spouses and civil partners, which happen at no gain and no loss. The receiving spouse inherits the original cost, so the gain is deferred rather than erased.

Why the spouse rule is so useful

Gain on an asset held solely            £11,000
Annual exempt amount, one person         £3,000
Taxable                                  £8,000

Same asset transferred into joint names first,
then sold: two exempt amounts are available,
and the lower earner's share may fall in the
lower rate band as well.

The transfer must be genuine and must happen before the sale is committed. Doing it after contracts are exchanged does not work.

The bit HMRC does not spell out

Death wipes out capital gains. Assets are revalued to their market value at the date of death and there is no CGT on the uplift, though inheritance tax may apply to the estate.

That interaction matters for anyone weighing whether to gift an asset during their lifetime. Gifting triggers CGT now; holding until death does not, but may increase the estate. The two taxes pull in opposite directions, which is exactly why this is an area for proper advice rather than a rule of thumb.

Common mistakes

• Assuming a gift is not a disposal. It is, at market value.
• Transferring to a spouse after agreeing the sale. Too late to help.
• Forgetting ISA and pension assets are exempt. They never appear.
• Treating the spouse transfer as erasing the gain. It defers it.