Changes to Capital Gains Tax rules for divorcing couples

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The UK government has recently announced plans to change Capital Gains Tax rules to provide separated spouses and civil partners with more time to transfer assets from 6th April 2023.  

What are the current rules?

Current Capital Gains Tax rules state that the transfer of assets between spouses or civil partners is done so on a ‘no gain or no loss’ basis; this means no tax liability is incurred.

However, upon separation this ‘no gain, no loss’ is only available until the end of the tax year; this means that if a couple wishes to transfer assets in the tax year following said separation, they may be liable to pay tax on these assets.

What are the changes?

Following recommendation from the Office of Tax Simplification (OTS), from 6th April 2023, separating spouses or civil partners will be given up to three years in which to make these ‘no gain or no loss’ transfer of assets when they no longer live together. If these assets form part of a formal divorce agreement, the time to transfer assets will be unlimited.

Furthermore, for any spouse or civil partner that has retained an interest in the matrimonial home will be provided with an option to claim Private Residence Relief (PRR) once the house is sold.

Individuals that have transferred their interest in the matrimonial home to their ex-spouse or civil partner, but are entitled to receive a percentage once the home is sold in the future, will be entitled to apply the same tax treatment to their proceeds that they applied when it was transferred. Ultimately, these changes aim to make Capital Gains Tax rules fairer for all parties involved.

Have some questions about the change? Speak to the team at Ellis & Co. today for our expert insight and guidance. Call us on 01244 343 504 or email info@ellis-uk.com.