Capital Gains Tax rule changes for separating and divorcing couples

There have been recent changes to the Capital Gains Tax (CGT) rules that will affect separating and divorcing couples which are going to be implemented from April 2022. 

What was the previous position?

Previously there was a ‘no gain no loss’ window, meaning that spouses could transfer assets to the other, including property such as land, without incurring capital gains tax. However, this was only the case if the transfer took place within the tax year following the parties’ separation.

What is the change in the law?

The ‘no gain no loss’ window is to extend and will end on the latter of the following:

  • The end of the tax year at least 2 years after separation; or
  • Any reasonable time set for the transfer of assets in accordance with a financial agreement approved by the court. This is likely to be in the format of a sealed court order.

This is a welcomed change as it has removed the time pressure that the previous CGT rules imposed on separating couples.

The details of the extension to the current time period is due to be consulted upon so clarity will be provided in due course.

This area can be complicated and we would recommend that you seek legal advice. Read more about our divorce and financial settlements services here.

Harjas Sehra | Senior Partner

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