This current rule change, proposed in the Spring Budget, is currently part of the Finance Bill (No 2) 2023 and has not been passed into effect in the Finance Act 2023 at this stage. We may see this rule change to be passed into the Finance Act prior to Parliamentary Summer Recess (21 July).
The new financial year has seen a change in regulation relating to Capital Gains Tax (CGT) implications for divorcing couples. This is also highlighted due to the change in this year’s CGT exemption. With a reduction from £12,300 to £6,000 and will fall further to £3,000 for the 2024/25 tax year.
For transfers between spouses and civil partners who are living together there is a treatment of No-Gain No-Loss (NGNL), meaning a tax liability of 0% is applied. This treatment then continues throughout the year of separation. Until April 2023, transfers after the year of separation the value of the transfers were taken at market value which meant that a CGT liability was levied against the value transferred.
The recent changes have seen the introduction of a continuation of the NGNL window for the transfer of assets after separation. The implication no longer arises in the new tax year after separation but now arises on the earlier of:
- The last day of the third tax-year, after the tax year in which the partners ceased to live together; or
- The day on which a court grants an order or decree for divorce, annulment, or judicial separation.
If you are going through a divorce and need some advice on what this means for your tax affairs please contact us for a free-of-charge initial consultation.
If you have any questions, please do give us a call on 0333 009 0801 or email on firstname.lastname@example.org