Capital Gains Tax rules for divorcing couples

11 Jan Understanding capital gains tax for divorcing couples

Posted at 00:00h in Family Law by

The Capital Gains Tax (CGT) rules for separating couples mean that if you are separating and you own a second property, you can transfer that property to your spouse, as part of your financial settlement, within three years of separation, without having to pay Capital Gains Tax.

  • This came into force after the Finance (No 2) Act 2023 received Royal Assent on 11 July 2023.
  • It applies to transfers after 6 April 2023.
  • Before April 2023, the transfer had to be made within one year.

Kathy Scoot, Family Law solicitor at HRJ Foreman Laws Solicitors discusses this further and considers the division of matrimonial assets in more detail.

The updated rules mean that separating couples have more time to distribute assets without incurring Capital Gains Tax charges. The ‘no gain/no loss’ rule will also apply to assets transferred between separating spouses as part of a divorce agreement.

Private Residence Relief

Spouses who keep the former family home after separation have the option to claim Private Residence Relief when the home is sold.  Let’s say a couple separate after the implementation of the updated rules in April 2023.  One spouse is staying in the former home the couple shared together.  It is agreed that the other spouse will receive a 25% share of the proceeds when the house is sold.  In this case he is entitled to use the Capital Gains Tax Private Residence Relief whenever the house is sold, even though he will not be living in the property at the time of sale.

What are the benefits for divorcing couples?

The changes should help to make the process for separating or divorcing spouses fairer and less complex. It allows more time to transfer assets without incurring Capital Gains Tax charges, particularly helpful during a time when finances may be a concern.

Dividing matrimonial assets

In addition to dividing the proceeds of a property, there are several other financial considerations when a couple are separating.  You will also need to consider any financial arrangements for your children, where you and your children will live, how other assets will be divided, and whether you will have enough income to meet your daily needs.

Before any negotiation can take place about the division of finances, both parties need to disclose their assets and liabilities to each other. Factors that are considered include the income and earning capacity of each party, financial needs, age of both parties, standard of living, state of health, contributions to the marriage.

Each financial case is assessed on its own individual merits to ensure the settlement reached is flexible and fair to both parties. Once an agreement is reached, it is drafted into a document known as a consent order.  This is then sent to The Court for its approval.  You will receive back from The Court a sealed order.

Our family law team will work closely with you to negotiate the division of finances and ensure you receive appropriate advice about any Capital Gains Tax which may arise. In addition our conveyancing team will support you through selling or buying a new property.  You can  work with our Wills, Trusts, and Probate team to update your Will and plan what happens to your assets in the future. We will also work with our commercial team if there is a business which needs to be dealt with as part of the settlement.

To make an initial appointment with one of our family solicitors

More information

Meet the team

Kathy Scoot, Partner and Family Law Solicitor

Roger Weller, Senior Associate Solicitor, Family Law

Vyonne Manuel, Associate Solicitor, Family Law

Keep up to date with our legal news and follow us: