The Government is introducing draft legislation that contains two important capital gains tax changes that apply to separating and divorcing couples.
Current Rules
Until now, transfers between spouses and civil partners are capital gains tax (CGT) exempt but the exemption ceases at the end of the tax year in which they permanently separate.
Summary of Proposed Changes
From 6th April 2023, spouses and civil partners will be given up to three years in which to make exempt transfers of assets between them when they cease to live together, and given unlimited time if the assets are part of a formal divorce agreement.
Rules will also be introduced that apply to individuals who have maintained a financial interest in their former family home following separation and that apply when that home is eventually sold.
Outline of New Rules and HMRC Guidance
Legislation will be introduced in Finance Bill 2022-23 that will provide that:
separating spouses or civil partners be given up to three years after the year they cease to live together in which to make no gain or no loss transfers
no gain or 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 be given an 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, 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 ex-spouse or civil partner
Further information on the changes can be found here.
Contact Us
Please contact us to find out how the above applies in your circumstances and how you can reduce your tax liabilities and maximise your tax efficiency.
Please note that the above is for general information only and does not constitute financial or tax advice. You should not rely on this information to make or refrain from making any decisions. You should always obtain independent professional advice in respect of your own situation.
