A welcome change in Capital Gains Tax for divorcing couples
Changes in tax for separation and divorce were announced last month which will ease the tax burden of many divorcing couples from next year. These changes will benefit not only wealthy taxpayers, but will also those whose only asset is their marital home. We believe that this is a welcome change which will ease the financial costs of divorce.
Under the current rules married couples and civil partners can transfer assets between them without incurring a capital gains tax liability but once separated the couple are only able to benefit from this treatment until the end of the tax year in which separation occurs. Couples separating towards the end of the tax year have little opportunity to transfer assets before capital gains tax becomes chargeable.
Draft legislation has been issued which will allow divorcing couples longer to arrange their affairs. From 6 April 2023, couples will be given up to three years in which to make no gain or no loss transfers of assets between themselves when they cease to live together; and unlimited time if the assets are the subject of a formal divorce agreement. There are also rules being introduced to protect divorcing couples who have retained an interest in their former family home.