Tax and property when you separate or divorce

When a couple separates or divorces, most attention focuses on the emotional and practical aspects. However, it is important to consider the tax implications of transferring assets, as these can have significant financial consequences if not managed carefully.

It is most important to consider if there are any Capital Gains Tax (CGT) implications. For transfers between spouses or civil partners, the rules changed on 6 April 2023. Couples that separate or divorce can transfer assets on a ‘no gain/no loss’ basis for up to three years after they stop living together. If the transfer is part of a formal divorce agreement, there is no time limit, ensuring no immediate CGT arises.

Private Residence Relief (PRR) may exempt individuals from paying CGT if the family home meets certain qualifying conditions. It is also important for couples to consider making a legally binding financial agreement. If an agreement cannot be reached, the court can issue a financial order, outlining how assets, financial support, and other arrangements are handled.

Careful planning during separation or divorce can help avoid unexpected tax charges and ensure that financial matters are resolved fairly for both parties.