When couples divorce, there is inevitably some division of assets. Jointly-owned assets may have to be sold, or a share in an asset or business transferred to the ex-partner.
These arrangements can take a long time to agree, but currently the Capital Gains Tax (CGT) rules only allow assets to be transferred between a married couple or civil partners on a tax-neutral basis while they are living together, or within the same tax year as their separation. This can create a CGT bill at a difficult time for the individuals concerned when assets are transferred after this deadline.
The Government has at last acted to help divorcing couples split assets without incurring unnecessary tax bills. From 6 April 2023 couples will have three years from the end of the tax year in which they separate to transfer assets tax-neutrally, so that no CGT liability arises at the time. In any event, if the assets are transferred as part of the formal divorce agreement, there will be no assessable gain on that transfer.
The new rules only apply to assets transferred from 6 April 2023, so if you are in the middle of divorcing and expect any asset swap to take some time, it may be better to finalise things after 5 April next year.
Please talk to us if you are going through a divorce as there may be other tax issues to consider.
