Divorce isn’t a topic that people like talking about (and Capital Gains Tax isn’t a topic that people who are going through a divorce want to think about), but if it is going to happen it is important all around that it is done in as tax efficient a way as possible. Divorcing spouses and civil partners needing to transfer assets between them in the separation process will be given up to three years in which to make no gain or no loss transfers of assets between themselves in case they stop living together. Separating spouses and civil partners are also given unlimited time if the assets are subject to a formal divorce agreement.
The objective is to make fairer Capital Gains Tax rules that apply to spouses and civil partners in the process of separating to give them more time to transfer assets between themselves without having to incur possible CGT charges. The changes will apply to separating couples occurring on or after 6 April 2023.
Before the deadline extension above, the no gain no loss was available to related disposals on the remainder of the tax year in which the separation happens, as opposed to the three-year recently announced. After that tax year, all transfers are treated as normal disposals for CGT purposes.
What else is changing from 6 April 2023?
The spouse or civil partner retaining interest in the former matrimonial home will not be given an option to claim Private Residence Relief (PRR) when the property is sold. Also, the no gain no loss treatment will apply to assets between partners as part of a formal divorce in the three years.
If you need further help, we advise you to contact your local AIMS Accountant to make sure you are doing the right tax move in your separation, or for help with any other tax affairs.