The 6th of April 2023 saw some changes made to the Capital Gains Tax (CGT) rules that apply to divorcing couples and the transfer/sale of assets.
CGT is a tax that is payable by an individual when profit is made on the sale, disposal or transfer of an asset, i.e. the asset is sold for more than the price paid at the time the asset was purchased. Tax is payable on the value of the profit and not the total amount received for the asset.
Prior to 6th April 2023, divorcing couples could only benefit from “no gain, no loss relief” if the transfer or sale of property was made in the same tax year as their separation. This would mean for example, if a couple separated on 1st August 2022 they would have until 5th April 2023 to benefit from the “no gain, no loss relief”.
Given that the divorce process can take a minimum of 6-8 months to conclude, and an agreed financial settlement (Consent Order) cannot be submitted to court until the Conditional Order stage which takes around 24 weeks to reach, this can add stress and anxiety at an already difficult time.
Following the changes made to the CGT rules on 6th April 2023, the time for divorcing couples to benefit from “no gain, no loss relief” has been extended so that divorcing couples can benefit from the relief for a 3 year period from the end of the tax year of the date of separation. Therefore, under the new rules if a couple separated on 1st August 2022, they would have 3 years following the end of the tax year on 5th April 2023 to transfer or sell property which would give them until 5th April 2026.
This change will be of benefit to divorcing couples who may require time to consider the division of matrimonial assets without the strain of having to consider a CGT liability meaning that there are more funds available to support the family into the future.
If this situation applies to you we would suggest take financial advice. Further information concerning these changes can be found via the Government website Capital Gains Tax: separation and divorce – GOV.UK (www.gov.uk)
“If you are currently divorcing or considering commencing divorce proceedings and believe you may have a CGT liability as part of the resolution of financial matters on divorce, we are able to instruct an expert in this field to calculate the CGT payable upon the sale or transfer of properties owned by the parties to the marriage which would fall to be considered as part of the financial settlement.” – Sharon Williams, Family Law Solicitor at Sinclair Law.
Our skilled team are able to provide guidance and assistance in this area. Contact us today to request a free 30-minute case review.