Separation to become less taxing

The government is planning to change the CGT rules for separating spouses. Currently, transfers can be made between couples on a tax neutral basis only up until the end of the tax year of separation (not divorce). This is a tight deadline! Inter-spousal transfers after this deadline may trigger a CGT charge. Yet this would lead to separation becoming less taxing

The new rules will extend the deadline to three years from the end of the tax year of separation, giving much greater time for couples to sort out their affairs without worrying about tax arising. The new rules will apply for transfers on or after 6 April 2023, irrespective of the date of separation. Also, transfers as part of a formal divorce settlement will always now be tax neutral from that date.

Other proposed changes cover situations where:

• a departing spouse retains an interest in the family home; or

• one spouse transfers their share of the matrimonial home to the other on divorce, but they retain a right to a share of the proceeds when the property is eventually sold.

Please talk to us as soon as possible if you are going through a separation or divorce, so that we can help you avoid nasty tax shocks.