The UK government has published draft legislation that could mean significant changes to Capital Gains Tax rules for divorcing couples from April 2023.

A photo of a couple sat side by side. Their body language is closed off. Their faces are out of shot.

Last month the government published draft legislation for the Financial Bill 2022-23. One of the most notable changes to tax is set to benefit UK couples who are going through a divorce. From 6th April 2023, divorcing couples will be given more time to transfer assets between themselves without incurring Capital Gains Tax (CGT) charges.

What are the current Capital Gains Tax rules for divorcing couples?

At present, divorcing couples must transfer assets during the same tax year that they separate if they wish to avoid paying capital gains tax. Assets transferred within this time frame are exempt from CGT, as they are still eligible for the no gain/no loss rule that benefits married couples and civil partners.

After the tax year has ended, the no gain/no loss rule no longer applies and asset transfers are treated as gifts at market value, making them potentially liable for CGT.

Capital Gains Tax rules for divorcing couples as of April 2023

Next year the rules of asset transfer will change to allow divorcing couples more time. Couples going through a divorce will be allowed up to three years from the year of separation to transfer assets on a no gains/no loss basis.

A number of other proposed policy changes will also prove beneficial:

  • No gain/no loss rule will also apply to any assets being transferred between the divorcing couple within a formal court order
  • If a spouse retains an interest in the matrimonial home, they may be able to claim Private Residence Relief upon its sale
  • If an individual transferred their interest in the matrimonial home to their ex-spouse and is entitled to a percentage of the proceeds upon sale of the property, they will be eligible to apply for the same tax treatment on those proceeds as was applied when they transferred their original interest to their ex-spouse.

Further advice and guidance on divorce

The best way to ensure the smooth transition of assets during your divorce is to seek professional support from a tax specialist. Contact us today to speak to one of our personal tax advisors and benefit from financial advice that is tailored to your needs.