Capital Gains Tax
News | 4 May 2023
Some very welcome changes to Capital Gains Tax came into force last month! From 6 April 2023 divorcing couples may actually avoid tax which they would have otherwise paid.
Some very welcome changes to Capital Gains Tax came into force last month! From 6 April 2023 divorcing couples may actually avoid tax which they would have otherwise paid.
Previously a couple had to transfer their assets from one to the other within the same tax year of separation. This meant that if a couple separated on 1st April 2021 they had until 31st March 2022 to transfer the assets. That might possibly be achievable but, for a couple who separated say on 30th March 2022, they stood no chance of completing their asset transfers by the following day.
The average divorce takes 1 year from start to finish. The court system is so delayed due to the pandemic that financial applications have been taking much longer. This has meant that the majority of divorcing couples with assets had to consider whether tax would be payable and who was going to foot that bill.
HMRC have thankfully extended the period of time in which transfers can be made at “no loss/no gain” for CGT purposes. Couples now have 3 tax years from the date of separation to get themselves sorted. In fact, that window of opportunity can be extended indefinitely if the transfer is a result of a Court Order.
These changes will ultimately reduce the pressure on parties trying to resolve their finances and give them a more realistic amount of time to get proper legal advice and consider the best outcome for them and their family.
The new rules have also eliminated a previously unfair situation occurring when party moves out of the family home but agrees to delay a sale of the property until the children are older. Incredibly they would then be penalised with a potential CGT liability when the property was sold. Now though, so long as certain conditions apply, that party can avoid CGT when they come to realise their share of the house.
Unfortunately, rules remain the same for cohabiting couples and Capital Gains Tax will apply.
Talk to a member of our Family Department today on 0208 290 0440 or email info@thackraywilliams.com
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