Legislation gives separating couples time to avoid taxation on assets

Divorcing or separating couples will have more time to get their affairs in order and avoid having to pay Capital Gains Tax (CGT) when new legislation comes into force.

Currently, if any transfer arrangements for assets are not completed within the tax year of separation, they could be subject to CGT.

Proposed new legislation dealing with the transfer of assets between partners provides that transfers of assets are made on a “no gain or no loss” basis in any tax year in which they are living together.

Exemption period extended

When spouses or civil partners separate, no gain or no loss treatment is only available in relation to any disposals in the remainder of the tax year in which the separation happens. After that, transfers are treated as normal disposals for CGT purposes.

The proposals will stretch this CGT exempt period to three years for separating couples, and allow any assets which are the subject of a divorce agreement to be transferred on a no gain/no loss basis without time limit.

This will apply for all disposals that occur on and after 6 April 2023 and has been brought about following a recommendation by the Office of Tax Simplification (OTS).

The final contents of Finance Bill 2022-23 will be subject to confirmation at Budget 2022 and are expected to confirm:

  • Separating spouses or civil partners be given up to three years after the year they cease to live together in which to make no gain or no loss transfers
  • No gain or no loss treatment will also apply to assets that separating spouses or civil partners transfer between themselves as part of a formal divorce agreement
  • A spouse or civil partner who retains an interest in the former matrimonial home be given an option to claim Private Residence Relief (PRR) when it is sold
  • Individuals who have transferred their interest in the former matrimonial home to their former partner and are entitled to receive a percentage of the proceeds when that home is eventually sold, be able to apply the same tax treatment to those proceeds when received that applied when they transferred their original interest in the home to their ex-spouse or civil partner
Loading Quotes...

Latest News

Four great reasons to file your tax return early

We often find that clients begin to show signs of stress when the Self-Assessment …
Read more…

New advisory fuel rates for electric company cars

HM Revenue & Customs (HMRC) has recently announced new Advisory Fuel Rates …
Read more…

Don’t pay more tax
than you need to

Register for our newswire

Our regular Newswire mailings are designed to keep you up to date with the latest industry news and events.

Register here

Client Login
Complete our Client
Satisfaction Survey

Spring Budget 2024

The latest Budget was an important speech for the Chancellor, Jeremy Hunt...

Read full our summary