HMRC have implemented new changes to Capital gains tax which will take effect on or after 6 April 2023.
The current law
Currently separating couples have only until the end of the tax year in which they separate to dispose of any assets on a “no gain or no loss basis”. After the end of the tax year in which they separate transfers are treated as normal disposals under Capital Gains Tax. This means that any gain or loss is postponed until the asset is disposed. The spouse or civil partner receiving the asset will be treated as if they purchased the asset at the same original cost.
The new law
If you are in the process of separating, the new rules will allow spouses and civil partners who have ceased living together, 3 years to transfer any assets on a “no gain no loss” basis. If the assets are subject to a divorce agreement, the rules will allow an unlimited amount of time. The new rules also contain specific rules for individuals who have held an interest in the family home. These specific rules will apply once the home is eventually sold, by claiming Private Residence Relief.
How does this effect you?
- The new rules allow spouses and civil partners, more time to transfer assets upon separation without incurring possible Capital Gains Tax charges.
- The new rules will allow spouses and civil partners in complex divorces, to focus on the divorce proceedings and not worry about Capital Gains Tax considerations.
- The new rules will also help to avoid any further reduction of household income, or accumulated income due to tax charges.
If you would like to talk to someone regarding your divorce or require any related advice from our specialist solicitors, then please contact us today where we can offer a free 30-minute consultation to discuss your matter.