Many taxes provide exemptions or special rules based on an individuals’ marital status. For capital gains tax purposes, transfers of assets between spouses/civil partners who are living together in a tax year are exempt from taxes, it is tax neutral. For inheritance tax purposes transfers of assets between UK spouses/civil partners are exempt.
However, there is no definition in UK tax law for marriage and civil relationships, so we must refer to the general law definitions.
Validity of marriage and civil partnership
In English law any two individuals may enter a marriage regardless of the gender, provided the requested formalities have been observed.
A civil partnership is relationship based on contract between two individuals, again regardless of their gender, who are not married which results in them becoming civil partners of one another and having the same legal status and rights as a married couple.
The requirements of a valid marriage between two individuals are the following –
- Correct age (over 18 – Marriage Act updated in February 2023)
- Not prohibited to get married, for example close relatives
- Not married to someone else (“Polygamous marriage”)
- Understand the nature of marriage and freely commit
- Have ceremony
If any above points are lacking (except consent), the marriage is IMMEDIATELY voided and considered never took place.
Marriage is voidable (considered married up until that point) in the following scenarios –
- Consent to stop
- Mental disorder and can no longer have relationship
- Was pregnant at time of marriage from another man and did not tell new husband
- Gender reassessment and did not tell new spouse about this information
In certain cases, the marriage can be annulled, and they were never considered married.
For tax purposes, a couple are considered “living together” and relationship continues unless the following occurs –
- Divorce
- Under court order – judicial separation – this is like divorce however they are still legally married but in tax purposes are considered separated.
- Deed of separation – the two parties themselves come to an agreement to separate and make an agreement in a document to the financial and parental obligations of each party (they are still considered civilly married).
- In circumstances where separation is likely to be permanent
For tax purposes, transfer of assets to a spouse or civil partner is not a taxable event as mentioned above. This transfer can even occur after they have separated, if it’s within 3 tax years following the tax year that it was considered in tax purposes for the marriage to end. For inheritance tax purposes, transfer of assets between couples are exempt until the final order of divorce.
Divorce (when legally married) and dissolution (when civil relationship) will end the relationship.
This can occur when the following have happened –
- Been married 1 year
- Relationship has broken down
There are 4 stages to divorce/dissolution –
- Application for divorce
- Within 14 days the other party must acknowledge the request
- 20-week delay period to allow reflection on their decisions and then conditional order is made
- After further 6 weeks, a further application maybe requested for Final Order
Tax Example
Simone and Jasmine entered a legally binding civil partnership in 2017. Simone transferred a chargeable asset to Jasmine on 30 July 2024. Simone and Jasmine separated on 30 November 2024 and Simone moved out of the family home. Simone transferred another chargeable asset to Jasmine on 1 February 2025.
Both transfers are tax exempt. Even though Simone and Jasmine were not living together from 1 December 2024, they were still civil partners and transfers between them up until the end of the third tax year following that in which they ceased to live together (i.e. 5 April 2028) will take place at no gain/no loss.
