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CGT changes: Amicable result for divorcing couples

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Extention of the no-gain no-loss window for divorcing couples is a welcome change to the tax treatment of transfers of assets.

29th Jul 2022
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The government has announced welcome changes to the tax treatment of transfers of assets between divorcing couples. Expected to take effect from 6 April 2023, the changes should help ease the financial burden at a stressful time and will benefit not just wealthy taxpayers with significant assets, but also those whose main asset is their home. 

The way in which no-gain no-loss transfer rules come to an abrupt end when a marriage or civil partnership breaks down has long been a deeply unhelpful part of the operation of capital gains tax (CGT). As it stands, spouses and civil partners can only transfer chargeable assets such as property, shares or business interests between them without incurring CGT up to the end of the tax year in which separation occurs. After that, they are treated as connected parties until the divorce is finalised. The result of this is that a couple who separate late in the tax year can be left with a limited – and often entirely useless – window to transfer assets without CGT considerations. 

The government have now moved to address this issue with a policy paper and draft legislation published on 20 July 2022. From 6 April 2023, couples will be given a more generous window of up to three tax years from the year in which they separate to transfer assets on a no-gain no-loss basis – and essentially an unlimited period if the transfer is made as part of a formal divorce agreement.

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Replies (7)

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By Tax Rascal
29th Jul 2022 14:38

The added changes to its interaction with PPR relief certainly demonstrates a willingness to make the system more fair, very welcome indeed. Though as a man in his early twenties, I don't hope to benefit from these revisions any time soon!

Thanks (3)
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By Hometing
29th Jul 2022 15:52

I'm suspicious........a proposal that makes clear sense.....

*checks it isn't 1st April*

Thanks (2)
Replying to Hometing:
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By Hugo Fair
30th Jul 2022 16:07

Maybe there are some impending divorces in the fraternity of ex-Chancellors?

Thanks (1)
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By Paul Crowley
30th Jul 2022 00:16

Fair play
But then it was HMRC looking to catch CGT where it was not intended to be
Result was that the honourable people doing the honourable thing paid tax
Unlike the current batch of avoiding chancellors and their families

Thanks (2)
Morph
By kevinringer
01st Aug 2022 10:57

Given how impractical and nonsensical many recent changes have been (30/60-day CGT, MTD etc), I am surprised that this logical and helpful change is being made. It is indeed a very welcome measure. Is it too much to hope this might be the first of many sensible changes?

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By Ian McTernan CTA
01st Aug 2022 11:43

Excellent, sensible change- how did it manage to get past the Treasury?

Unfortunately coming in just too late to help a current client but will no doubt be useful in future.

Now if they could just work on the other 10,000 or so problems with the tax system...

Thanks (1)
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By markabacus
03rd Aug 2022 13:34

Sadly I have a client in just such a position, separated mid Jan. If I've understood correctly and I confess I need to read up a lot more, a posponing the transfer of assests until 6/4/23 or later could be beneficial
Mark

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