Positive news for divorcing spouses: Capital gains tax update

Posted by Norman Hartnell on 3rd August 2023

In this article our director and leading divorce lawyer Norman Hartnell explains the positive impacts of the changes to capital gains tax (CGT) for divorcing spouses.

On 11th July the second Finance Act of the year received Royal Assent, the effect of which is to relieve divorcing spouses of a liability to capital gains tax in the following circumstances, when previously they would have been liable. Formerly only transfers made within the same tax year that the couple separated (until 5^th April) would have given rise to no such liability, any transfers on or after the following 6^th April would attract an immediate liability to capital gains tax.

So, the new rules are as follows:

1. Separating spouses or civil partners will be given up to three years after the year they cease to live together in which to make no gain/no loss transfers
2. The 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 without a time limit
3. A spouse or civil partner who retains an interest in the former matrimonial home will be given an option to claim private residence relief when it is sold, and
4. Individuals who have transferred their interest in the former matrimonial home to their former spouse or civil partner, and are entitled to receive a percentage of the proceeds when that home is eventually sold, will 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 former spouse or civil partner

The government have backdated the effect of these improvements to 6^th April this year.

OK it’s complicated which is why it is vital that you instruct solicitors who understand the tax rules which apply to all such transfers. If you are contemplating a divorce which could involve transfers of property please contact our new client team on [email protected] or complete the form below.

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