Fair Share: What the New CGT Rules Mean for Divorcing Couples


Fair Share: What the New CGT Rules Mean for Divorcing Couples

Divorce is always difficult, even when a break-up is amicable, there are lots of decisions that need to be made and issues that need to be resolved as a couple looks to go their separate ways.

It is always a stressful time and has not been helped in recent years by undue pressure on divorcing couples to split their assets quickly to avoid paying Capital Gains Tax (CGT) on any assets they transfer between themselves.

Recent changes to the CGT rules introduced by the Government on 6 April 2023 will make it easier and fairer for divorcing couples to split their assets. Under the new rules, separating couples will get more time to transfer assets without the risk of having to pay CGT.

In this blog, our Family Law team looks at the changes that the Government has introduced and considers the impact the new rules will have on divorcing couples.

What is CGT?

CGT refers to the tax paid on the profit you make from disposing of an asset (for example, by selling it, giving it away as a gift, or transferring it to someone) that has increased in value.

For separating or divorcing couples, CGT deals with the transfer of assets between individuals after their separation or divorce. Assets usually include property, shares, and personal possessions.

For CGT purposes, each spouse or civil partner is treated as a separate individual, and each is entitled to their own annual exempt amount. Despite being treated as separate individuals, married couples and civil partners who live together can benefit from a special rule which allows them to transfer assets between them at a value that gives rise to neither a gain nor a loss. 

You can learn more about CGT and how it is calculated by going to the UK Government’s website by clicking here.

What was the old ‘no gain, no loss’ rule for divorcing couples?

Until 6 April 2023, spouses and civil partners could only apply the ‘no gain, no loss’ rule for the remainder of the tax year in which their separation or divorce occurred. However, this unfairly penalised couples who decided to separate towards the end of a tax year as they had less time to sort out their financial affairs than, say, a couple who had decided to separate at the end of the previous tax year.

What are the new rules?

Under the new rules, separating spouses or civil partners will be given up to three years after the year they stop living together to make ‘no gain, no loss’ transfers. This will also apply to assets transferred as part of a couple’s formal divorce agreements, regardless of the date they are disposed of. 

The changes also state that the spouse or civil partner who retains the interest in the formal marital home can claim Private Residence Relief (PRR) when the property is sold.

In addition, those who have transferred their interests in the matrimonial home to their ex-partner are entitled to receive a percentage of the gains when the property is disposed of, meaning the same tax rule applies as when they transferred their original interest.

The new rules are a welcome change and will mean couples have more money for themselves and any children rather than having to use their wealth to fund unnecessary tax charges.

For more information about the changes to capital gains tax for divorcing couples, please click here to go to the UK Government’s website.

Divorce Solicitors Alton, Hampshire

If you are going through a divorce and want advice on how the changes to the CGT rules might affect you, please get in touch with us today.

Our specialist solicitors at Bookers & Bolton have extensive experience in family law and offer a comprehensive range of services for divorce and separation procedures. Our friendly team will keep you informed and make sure you are prepared for every stage of your separation, helping you navigate this complicated and overwhelming process.  

To speak to a member of our family law team, please call us on 01420 558 290/330 or email us at enquiries@bookersandbolton.co.uk. Alternatively, you can visit our office at 6 High Street, Alton, Hampshire, where you will be greeted by a friendly face who will assist you with your enquiry.