Changes to Capital Gains Tax (CGT) for separation and divorce from 6th April 2023 as outlined in the government’s policy paper: Capital Gains Tax: Separation and Divorce.
From 6th April 2023, separating spouses or civil partners will be given up to three years from the year they cease to live together in which they can make “no gain or no loss” transfers of assets. This means that chargeable assets such as property, shares or business interests can be transferred between them without incurring capital gains tax.
Essentially, the new measure is intended to make the rules around CGT for separating or divorcing couples fairer; it gives people additional time in which they can distribute assets between themselves, before CGT charges are incurred.
It should be noted that only those separating from a marriage or civil partnership are able to benefit from the “no gain, no loss” provisions.
Under the current legislation:
Section 58 of Taxation of Chargeable Gains Act 1992 covers the transfer of assets between an individual living with their spouse or civil partner.
Currently, “no gain, no loss” treatment on disposals is only available until the end of the tax year in which separation occurs. This has often been argued as unfair due to the length of time that it takes couples to agree a fair split of assets during a particularly difficult period.
Summary of the changes being introduced from 6th April 2023
- The new measure will give separating couples up to three years in which to make “no gain or no loss” transfers of assets between themselves when they cease to live together
- It will also give separating couples unlimited time to make “no gain or no loss” transfers if the assets are the subject of a formal divorce agreement
- If an interest in the former matrimonial home is retained, a spouse or civil partner 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 be able to apply the same tax “no gain no loss” treatment to those proceeds as individuals transferring their interest immediately on separation
If you would like to find out more about the upcoming changes or require some tailored advice, please contact our Senior Tax Manager, Vanessa Glenn.
Email: [email protected]
Phone: 02476 306029