Changes to tax rules on separation and divorce

HMRC is proposing to change the current capital gains tax rules which tax transfers of assets between separating spouses and civil partners.  

The current rules tax any transfer of assets between separating couples as though they had sold that asset for its market value to the other party. Because the relationship has broken down, the usual spouse / civil partner exemption does not apply, meaning the transfer of assets results in a taxable gain.

New rules

New measures coming into force for transfers made on or after 6 April 2023 extend the ability to claim the spouse exemption to the end of three tax years after the tax year of separation.

For example, if a couple separate in June 2024, any transfers of assets between them will continue to be exempt under the spouse exemption until 5 April 2028.

In addition, transfers of assets made as part of a formal divorce agreement will also now be exempt from a charge to capital gains tax.  The availability of the main residence exemption for the marital home is also being extended to cover situations where:

• A spouse or civil partner retains an interest in the former matrimonial home
• A spouse or civil partner entitled to receive a percentage of the future proceeds from a sale of the matrimonial home following them transferring their interest in it to their ex-spouse or civil partner will be able to claim relief if the relief applied on the initial transfer of the property.

This would appear to be a welcome simplification of some often confusing and complicated rules.  

Further information

You can find more information on our Estate Planning and Probate Services page.

If you would like to discuss probate and about keeping good records, please contact a member of our Estate Planning & Probate team who will be pleased to talk to you.