Family & Divorce

New proposed legislation regarding Capital Gains Tax on Divorce and Separation

A new policy paper on Capital Gains Tax legislation is to come into force for disposals that occur on or after 6 April 2023.

27 Jul 2022

Team name
Emma Boys-Smith

Emma Boys Smith

Currently, “no gain no loss” treatment on disposals is only available in the remainder of the tax year of separation which can be costly.

The new measure will give separating couples up to three years in which to make no gain or no loss transfers of assets between themselves when they cease to live together; and unlimited time if the assets are the subject of a formal divorce agreement.

It will also introduce some special rules for individuals who have maintained a financial interest in their former family home following separation and rules that apply when that home is eventually sold.

The new measure is intended to make the CGT rules for separating couples fairer since it allows more time for couples to transfer assets between themselves without incurring CGT charges.

The proposed revisions are as follows:

  • separating spouses or civil partners be given up to three years after the year they cease to live together in which to make no gain or no loss transfers
  • no time limit for no gain or no loss treatment applicable to assets that separating spouses or civil partners transfer between themselves as part of a formal divorce agreement
  • a spouse or civil partner will be given the option to claim Private Residence Relief (PRR) when the former matrimonial home is sold if they retain an interest
  • individuals who have transferred their interest in the former matrimonial home to their ex-spouse or civil partner under a Mesher order where they are entitled to receive a percentage of the proceeds when that home is eventually sold, will be able to apply the same tax no gain no loss treatment to those proceeds as individuals transferring their interest immediately on separation.

The new legislation will be fairer for those spouses who are separating or divorcing and are in process of distributing assets between themselves.

Three years for separating couples and no time limit for divorcing couples to make no gain or no loss transfers between themselves is likely to benefit individuals, especially those involved in more complex settlements, as it will give them more time to work out their agreement.

The changes will also mean that the couples’ wealth is not reduced by tax payments.

M&P Commentary

Emma Boys-Smith, a paralegal in our Family Department, said:

“The new legislation is a welcome change in tax law, especially when divorce settlements are taking so long to go through the courts at the moment.”

OUR CLIENTS SAY ABOUT US

Ranked highly in Romford and Brentwood for solicitor firms

Dispute resolution
I am extremely grateful for the service I received, with professional help & advice these past years.
Mr North
Trusts and Probate
We would like to thank Anne and Manzurul for helping to make our probate application go smoothly and efficiently. We found the process very professional.
M McDermott
Wills
From start to finish our needs were handled with all due care and attention to detail.
Anonymous
Residential Property
Svetlana at Mullis & Peake recently handled our divorce transactions and house purchase, no fuss, straight forward advice, great communication and handled efficiently.
Mcdocat
Residential Property
Trusts and Probate
Excellent service and very good advice on both recent matters. Mullis & Peake have acted for our family for many years and have proved very professional on each occasion
Terry
Residential Property
Mullis & Peake dealt with both the sale and purchase for my mum's properties. Paul is professional, helpful and efficient. Explained all the processes in a timely manner. Top quali...
Jenny
Family
I've found the service I've received at Mullis and Peake to be courteous, professional and highly recommendable.
Carole
Family
Special thanks to Roisin McCorry for her professionalism, resolve, patience, and the support she provided during this very difficult time.
Richard
Dispute resolution
Extremely satisfied with service received from Mullis & Peake. I would thoroughly recommend their service as they were recommended to me.
Paul