Capital Gains Tax (CGT) is an important part of calculations completed when divorcing and separating. Under current law, spouses and civil partners have been able to transfer assets between them with no gain or loss calculation for CGT purposes up to and including the tax year of separation. After that, CGT would be paid at normal market rates. The timing and payment is something that separating couples have had to pay close attention to, to avoid hefty CGT bills.

There are proposed changes from 6 April 2023 which tax advisors believe will be helpful to separating couples. These changes provide:-

·      A period of 3 years after the tax year of separation for there to be no gain or loss on transfer of assets, this timeframe to be unlimited if the transfers are subject to a formal divorce order.

·      The ability for a spouse or civil partner to claim Principle Residence Relief on the former matrimonial home, if they have retained an interest in it and not elected another property as their Principle residence.

·      The option to treating money received on a delayed sale of a family home, when the home had been transferred to the other spouse, as if it were received at the time of transfer for tax purposes.

 These changes will apply if one spouse has remained living at the family home.  The rules are not changing for CGT payments on transfers between spouses for investment properties or business assets. It is important to remember that non loss/no gain does not wipe out any CGT but instead moves it to the other spouse for payment at a later date of disposal.

The proposed rule changes will apply to transfers after 6April 2023, which is the same time as the CGT annual allowances a reduces by half, to £6,000 and reducing further in the tax year 2023/2024 to £3,000.  For those at the point of separation, reviewing the benefit of the potential rules changes versus the reduced annual allowance, will need to be considered carefully.

It is hoped the proposed changes will make the tax system more straightforward and helpful for separating couples but tax advice and planning will still be vital, although the proposed legislation has yet to be made law, so watch this space!

We can involve accountants and tax specialists in cases where this issue is relevant in mediation. If you would like to find out if mediation could help, why not book a free call using the online booking facility on our website – www.familymediationandmentoring.co.uk or send us an email at hello@familymandm.co.uk . You could also call us on 0800 206 2258.

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