New Capital Gains Tax Rules for Divorcing Couples
12/04/2023
New Capital Gains Tax (CGT) rules have come into force (6 April 2023) that will give spouses and civil partners who are in the process of separating more time to sort their financial affairs.
Under the new rules, couples that are divorcing or dissolving a civil partnership will have up to three years after the tax year from when they stop living together to make a ‘no gain, no loss’ disposal for CGT purposes.
Capital Gains Tax Changes
Previously, divorcing couples were only given until the end of the tax year, in which they separated to make any transfers of assets without incurring a CGT charge. This unfairly penalised couples who decided to separate towards the end of a tax year (for example, on 5 April 2023) as they had less time to resolve their financial affairs (one day) than, say, a couple who had decided to separate at the end of the previous tax year (such as 7 April 2022, which would give the couple more than eleven months).
The government announced the changes to the rules in the Spring Budget on 15 March 2023, and they are being introduced now to coincide with the start of the new tax year.
The new rules should be welcomed as they make the process fairer for those spouses who are separating or divorcing and are in the process of distributing assets between themselves. This also means that parties do not suffer from additional pressures in addition to the already difficult process of resolving financial matters resulting in a marriage breakdown.
What are the new Rules?
The new rules provide that:
- Separating spouses or civil partners will be given up to three years after the year they stop living together to make no-gain/no-loss transfers.
- No-gain/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 will be given the option to claim private residence relief (PRR) when it is sold.
- Individuals who have transferred their interest in the former matrimonial home to their ex-spouse or civil partner and are entitled to receive a percentage of the proceeds when that home is eventually sold will now be able to apply the same tax treatment to those proceeds when received that applied at the time they transferred their original interest in the home to their ex-spouse or civil partner.
You can read more about the changes to capital gains tax rules for divorcing couples on the UK Government’s website by clicking here.
Family Law Solicitors Near Me
If you are going through a divorce and want to know how the changes to capital gains tax will affect you, please call 0800 103 2600 to speak to one of our team today, or fill in our online contact form, and someone will get back to you.
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