Asset Transfers for Separating Spouses and Civil Partners
Following a separation from your partner, knowing your potential Capital Gains Tax (CGT) liability won’t be top of your priority list. One positive is that since April 2023 married couples and civil partners now have three years, (previously one year), to transfer assets without paying tax on any increase in the transferring assets value.
A QUICK BREAKDOWN
1. Separating couples now have three years to transfer assets at no gain, no loss when they cease to live together. The three years is intended to benefit parties involved in complex proceedings, allowing more time to be spent on the divorce considerations rather than CGT.
2. If the transfer is part of a formal divorce settlement, this period will be extended indefinitely.
HOW DOES THIS AFFECT THE MARITAL HOME?
‘Principal Private Residence relief (PPR)’, Capital Gains Tax relief is available when you sell your home, meaning no CGT is required to be paid.
But what happens when you or your spouse/civil partner moves out following a separation?
The rules introduced in April now allow PPR relief to be claimed within the three year period if one of the couple has retained an interest in the property – even if they’d moved out. Simply put, the sale of the property will still be treated as a jointly owned home, and therefore no tax would be due.
However, if the leaving party nominates another property as their Principal Private Residence, they may be liable for CGT following the sale of the marital home.
READY TO SUPPORT YOU
Going through a separation is a difficult time, but it’s important to consider your tax and financial obligations. Our team can support you at this time with advice early on, helping to lighten the load and avoid any unexpected tax.
CGT liabilities on separation can be complicated and time consuming, or if you’re considering an asset transfer or disposal, GET IN TOUCH.
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