As long as you’re married or in a civil partnership and living together as a couple, you can sell or gift assets to your husband, wife or civil partner without having to pay Capital Gains Tax (CGT).
But until very recently, it was different for couples who were in the process of separating. Unless completed before the end of the tax year in which the couple separated, any transfers could be subject to CGT.
However, From 6th April 2023, the rules around CGT have changed to make things fairer for spouses and civil partners going through a separation.
What’s changed since 6th April?
From the start of the new tax year on 6th April 2023, the following new rules
apply to transfers of assets between spouses and civil partners who are in the process of separating:
- Couples have up to three years after the year they cease living together to transfer assets between each other on a no gain and no loss basis – meaning that CGT will not apply until the receiving partner comes to sell or gift the asset.
- When assets are transferred between a separating couple as part of a formal divorce settlement, they are allowed unlimited time to make transfers on a no-gain and no-loss basis for CGT purposes.
- Where a separating spouse or civil partner maintains a financial interest in the former family home, they have the option to claim Private Residence Relief when the property is eventually sold.
- If one of the parties separating transfers their interest in the former family home to their ex-spouse or civil partner on the basis that they will receive a proportion of the sale proceeds when the property is sold, the ex-spouse or civil partner is entitled to treat income from the sale as a disposal of their matrimonial home and claim any available relief accordingly.
It’s always tough when a couple decides to separate. Requiring parties to make important decisions about transferring assets in what may be a very short time frame – and while emotions may still be running high, does nothing to make the situation any easier.
The rule changes which came into effect on 6th April will make things fairer for separating and divorcing couples, giving them up to three tax years to consider their position and transfer or sell assets (or their interest in them) and be exempt from CGT – rather than just until the end of the current tax year.
From 6th April 2023, anyone in the process of separating now has an extended period in which to divide or dispose of assets without incurring CGT.