Simplifying the capital gains tax on a property when a couple separate

Many people are still not fully aware of the changes that took place on 6^th April 2023 in regards to capital gains tax (CGT) on a property when a couple separate. Previously the old rules were very inflexible where the no gain / no loss treatment could only apply for a short period of time. Whilst it is almost a year since these changes were introduced many people are still unaware of what they mean.

This blog post will explore the details further.

It goes without saying that when a couple goes through a separation it can be a very stressful period. On top of that agreeing on what happens with the assets and associated property can only add to the problems. With the introduction of these CGT changes the following rules will apply:

• Those involved in the separation can take up to 3 years from the date of the split to issue a no gain no loss transfer on all relevant assets thus minimising any capital gains tax.
• Any timeframes previously in place for the transferring of assets following a formal split such as a divorce have been removed.
• If any partner has remained in the shared home then they are entitled to claim private residence relief once the property is sold.

Another major positive with this change is that all parties involved in the separation can take their time and organise all their financial matters without worry or concern that they will face liabilities in relation to CGT. The process of transferring assets is a simple one and any previous issues around dates for separation are removed.

Although on the whole these changes see a number of benefits there are still some areas to be aware of:

• Some fees around CGT could apply if there are cash agreements in place as part of any separation.
• If any oversees assets are involved then the no gain no loss rule will not apply, meaning tax payments could occur.
• If assets are transferred but then later sold there is a high probability that future tax charges will be incurred.
• Anything in relation to income tax should be treated separately. For example if a family company exists between all parties and dividends are taken then liabilities could be applied.

To conclude when a civil or marital partnership breaks up and there is the requirement for a split of assets it is very important to consider the tax positions for each party. It can be a minefield for individuals to understand especially at a time which is incredibly stressful and emotionally draining. This is why it is recommended that specialist help is sought to assist with the entire process.

For anybody that does has any questions in regards to CGT or in need of any form of accountancy help, please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk. You can also book a free 20-minute call with Yarka – https://calendly.com/yarka-ssa/20min