Capital Gains Tax rules for divorcing couples are set to change on 6 April 2023, the Government has announced.
As things currently stand, if a couple transfers assets between them any time after the tax year in which they separated, there may be tax to pay.
The new rules will give couples three years tax free – and unlimited time when a transfer is part of a formal divorce agreement.
The rules around property are also changing – meaning those who moved out of a marital home but kept a share in it will be able to claim Private Residence Relief.
Full details of all the changes can be found on the Government’s website here.
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said: “When you’re going through a divorce, there’s already enough stress and pressure to be getting on with.
“Couples don’t need the added trauma of being on the clock to split their finances before the end of the tax year. This welcome change will be a huge relief to anyone going through a more complex split – or a poorly timed one – giving them more time to come to an agreement.
“At the moment, any transfer of assets between the couple in the same tax year as the separation is considered to be a transfer between spouses – so it doesn’t trigger Capital Gains Tax.
“However, if you cross tax years while you’re still sorting out the details, any transfer could potentially be subject to the tax. For anyone who splits late in the tax year, or takes a while to come to an agreement, this can be horribly expensive.
“From next April, the rules will change, so couples have three years from the split to share assets without triggering a tax bill, and an unlimited time if those assets are part of a formal divorce agreement.
“They will also introduce rules for someone who moved out of the family home, but kept a share in it.
“When it’s sold they will be given the option to claim Private Residence Relief. Those who have transferred their interest in the property to their ex, will be able to apply the same tax treatment to the sale proceeds as applied when they transferred it.”
