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Capital Gains Tax And Transfer Of Assets On Separation

Does it still apply? And how long for?


Posted by Roger Eddowes on 05/09/2022 @ 8:00AM

On separation, couples will usually have a lot of issues to deal with and details to iron out. Thinking about tax efficiency isn't likely to be anywhere near the top of that very long list ...

It's important, from a tax point of view, to decide when you're going to separate!

It's important, from a tax point of view, to decide when you're going to separate!

copyright: ilixe48 / 123rf

Tax law isn't helpful to separating couples. If one decides to transfer their ownership of joint assets to the other, they can face unexpected tax issues with the transfer.

"Capital Gains Tax continues to apply in the year of separation!"

So, it's important, from a tax point of view, to decide when you're going to separate. If you part in late March rather than in late April, you may be subject to tax implications that aren't intended or expected.

There have been a number of representations regarding the rules for separating couples, and how much time they have to decide on their financial arrangements. The Government announced recently that for assets transferred after the 6th of April 2023, couples have three years from the date of separation to make a transfer and not be subject to Capital Gains Tax.

"If that separation is a legal divorce, then the
timescale becomes indefinite!"

However, between now and the 6th of April 2023, separating couples could still be covered by the Nil Gain Nill Loss rules currently in place. Yet, couples who separated in 2021/22 and did not transfer assets in that tax year will need to wait until after the 6th of April 2023 rule change to take advantage of it. This may cause additional stress at an already difficult time.

Note that Principal Private Residence relief applies when the main residence is sold, so no Capital Gains Tax is payable on any increase in value. Remember though, a married couple can only have one main residence, even if one party leaves on separation!

Should one spouse sell the main residence after transfer by the other and gives some of the proceeds to the first spouse, these proceeds are treated as if the property was still jointly owned and no Capital Gains Tax would be due.

Until next time ...

Business Godparent


Would you like to know more?

If anything I've written in this blog post resonates with you and you'd like to discover more about capital gains tax or tax efficiency on separation, it may be a great idea to give me a call on 01908 774320 and let's see how I can help you.

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About Roger Eddowes ...


Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.

Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.