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What do New Capital Gains Tax Proposals Mean for Divorcing Couples?
Posted on: 3 mins read
Lorraine Harvey
Partner, Family Law
The Government has published draft legislation that will bring in changes to the rules surrounding Capital Gains Tax for divorcing couples from April 2023.
This comes after the Office of Tax Simplification released its second Capital Gains Tax report, outlining recommendations for an extended “no loss no gain” window in which separating couples can transfer and dispose of assets without the application of Capital Gains Tax.
Following the Government’s original agreement to the report’s recommendations in November 2021, they have now set out detailed proposals for how the new rules will work in practice. We’ve explored these further in this article.
For initial advice that is tailored to your situation, get in touch with our expert Family and Divorce Lawyers for a no obligation consultation.
Call our team today0808 239 3465
We're rated‘Excellent’The Government has published draft legislation that will bring in changes to the rules surrounding Capital Gains Tax for divorcing couples from April 2023.
This comes after the Office of Tax Simplification released its second Capital Gains Tax report, outlining recommendations for an extended “no loss no gain” window in which separating couples can transfer and dispose of assets without the application of Capital Gains Tax.
Following the Government’s original agreement to the report’s recommendations in November 2021, they have now set out detailed proposals for how the new rules will work in practice. We’ve explored these further in this article.
For initial advice that is tailored to your situation, get in touch with our expert Family and Divorce Lawyers for a no obligation consultation.
What is Capital Gains Tax?
Capital Gains Tax is applied to any profit made when you sell or dispose of an asset that has increased in value since you first purchased it. This could include property, shares or bonds, a business or valuable possessions that are sold for more than £6,000.
An asset is considered as being “disposed” of when you’ve either:
- Given it to someone as a gift
- Swapped it for something else
- Received compensation for it, such as an insurance payout if it’s been lost or destroyed
Under the current legislation, separating couples are very limited in the time they are given to sell or dispose of assets before Capital Gains Tax is applied.
What Are the Current Rules?
Under Section 58 of the Taxation of Chargeable Gains Act 1992, couples who are living together as spouses or civil partners are able to transfer assets between each other on a no loss no gain basis for as long as they are cohabiting.
When spouses or civil partners divorce, they will only be able to transfer or dispose of assets without Capital Gains Tax being applied until the end of the tax year in which they separate.
After this time period, all transfers and disposals will have Capital Gains Tax applied to them. This can create a significant amount of stress for separating couples as they rush to distribute and sell their assets.
More time to deal with everything
"Going through a divorce can be stressful enough without parties being subject to strict and tight timescales for transferring assets to minimise tax. Once the new rules are in place, couples will have more time to deal with the transfer of assets, which will hopefully minimise the emotional and financial pressure involved."
Lorraine Harvey, Family Law Partner
Simpson Millar Solictors
What Are the Main Changes Proposed?
As well as the extension of the time limit on when separating couples can transfer their assets on a no loss no gain basis, the new proposals will mean:
- A spouse or civil partner who retains interest in a previously shared home can claim Private Residence Relief (PRR) when it is eventually sold.
- Individuals who have transferred interest in the former matrimonial home to their ex-spouse or civil partner will get the same tax treatment when the property is sold as when they originally transferred the interest.
- Where assets are the subject of a formal divorce agreement, there will be no time limit on when they can be transferred or disposed of on a no loss no gain basis.
Our Divorce Solicitors are experts and can advise you on how best to divide your assets, settle your finances and give you peace of mind that you won’t pay any unnecessary Capital Gains Tax. Get in touch today for further advice.
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