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Capital Gains Tax Separating Couples

Capital Gains Tax – Separating Couples

REMOVING THE ANGST FROM CAPITAL GAINS TAX

Separating couples will be provided up to three years in which to make no gain or no loss transfers of assets between themselves.

From 6th April 2023 the Government is proposing that separating couples will be provided up to three years in which to make no gain or no loss transfers of assets between themselves when they cease to live together and unlimited time if assets are subject to a formal divorce agreement.  It will also introduce some special rules 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.

This measure is designed to make fairer the Capital Gains Tax Rules that apply to spouses and civil partners who are in the process of separating.  It gives them more time to transfer assets between themselves without incurring a possible charge to Capital Gains Tax.

This is a significant change given that the current Capital Gains Tax (CGT) legislation provides that transfers of assets between spouses and civil partners who are living together, are made on a “no gain or no loss” basis in any tax year in which they are living together.  This means that any gains or losses from the transfer are deferred until the asset is disposed of by the receiving spouse or civil partner who will be treated as having acquired the asset at the same original cost as the transferring spouse or civil partner.  When spouses or civil partners separate, no gain or loss treatment is only available in relation to any disposals in the remainder of the tax year in which separation happens.  After that, transfers are treated as normal disposals for Capital Gains Tax purposes.

Legislation will be introduced in the finance bills 2022/2023 and will provide as follows:-

  • Separating spouses or civil partners be given up to three years after the year they ceased to live together in which to make a no gain or no loss transfer.
  • “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 Residents 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 the home is eventually sold, be able to apply the same tax treatment to those proceeds when received that applies when they transferred their original interest in the home to their ex-spouse or civil partner.”

Matt Clemence, Head of Family Law at Kerseys Solicitors LLP says “This is not before time.  This will significantly change the landscape for separating couples who wish to share their assets fairly without punitive tax penalties, which can at times blight what both couples are seeking to achieve.” 

If you would like to know where you stand in relation to any issues relating to matrimonial matters including children, please contact our Family Team at Kerseys Solicitors in Ipswich Suffolk 01473 213311 or Kerseys Solicitors in Colchester Essex 01206 584584 alternatively visit our web site and click “Call Me Back” and a member of the team will be happy to call you.

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