Dividing crypto assets in a divorce can trigger Capital Gains Tax if not handled carefully.
Transfer Between Spouses
| Action | Tax Event |
|---|---|
| Transfer during marriage | No CGT (spouse exemption) |
| Transfer after separation | May be a disposal |
| Transfer as part of court order | Depends on timing |
| Transfer to ex-spouse (final) | Usually a disposal |
The Spouse Exemption
Transfers between spouses who are not separated are treated as no gain/no loss for CGT. The receiving spouse inherits the original cost basis.
| Scenario | CGT Due |
|---|---|
| Married couple transferring crypto | None |
| Separated couple transferring crypto | Likely CGT |
| Divorced couple transferring crypto | CGT applies |
Timing Matters
| Action | Best Timing |
|---|---|
| Transfer crypto to spouse | Before separation (spouse exemption applies) |
| Sell crypto for cash split | After divorce (each has own allowance) |
| Equalise pensions with crypto | Use cash, not crypto in kind |
Practical Scenarios
Scenario 1: Sell and Split Cash
- Sell crypto
- Pay CGT
- Split remaining cash Tax: CGT on the gain at your rate.
Scenario 2: Transfer Crypto in Kind
- Transfer Bitcoin to ex-spouse
- Tax: CGT on the gain (spouse exemption not available post-divorce)
- Ex-spouse’s cost basis: market value at transfer
Scenario 3: Keep Crypto, Ex Gets Other Assets
- Keep crypto, ex gets the house
- Tax: No CGT (no disposal), but ex may have SDLT on house
Court Orders and Crypto
If a court orders a transfer of crypto:
- The transfer is still a disposal for CGT
- HMRC doesn’t waive tax for court orders
- You may need to sell some crypto to pay the tax
Disclosure Requirements
In divorce proceedings, you must disclose all crypto assets. Hiding crypto is dangerous:
| Risk | Consequence |
|---|---|
| Non-disclosure | Court can overturn settlement |
| Hiding crypto | Potential tax evasion investigation |
| False declaration | Contempt of court |
What to Do
| Step | Action |
|---|---|
| 1 | Value all crypto at separation date |
| 2 | Document cost basis of each holding |
| 3 | Agree who gets what (in value, not tokens) |
| 4 | Consider selling and splitting cash |
| 5 | Get tax advice before transferring |
Bottom Line
Divorce and crypto is complex. Transfers between spouses during marriage are tax-free. Post-separation transfers trigger CGT. Selling and splitting cash is simplest. Disclose all crypto assets. Get professional advice before signing any agreement.