The Budget 2023 Announced Some Helpful Changes for Separating Couples from 6 April 2023

The 2023 Budget confirmed that helpful changes to Capital Gains Tax (CGT) rules for separating couples will take effect from 6 April 2023.

Helpful Changes for Separating Couples from 6 April 2023

What does it mean?

Currently, no CGT is due on a transfer of assets between a married couple or civil partners that live together. That is known as the ‘no gain no loss’ rule.

Once that couple separate (stop living together, or are living separately but under the same roof), that tax relief has a time limit from the date of separation. Until 6 April 2023, transfers are only subject to the no gain no loss rule in the tax year that the couple separate. That has meant that couples separating close to the April deadline had very little time to effect transfers and benefit from the rule. The change that takes effect from 6 April 2023 provides that separating couples will have up to three years after the date of separation to transfer assets between them without CGT being charged.

The time period set out above would end earlier if decree absolute/final order was made in the divorce. However, in addition to the above, from 6 April 2023 the no gain no loss rule will apply with no time limit to assets transferred between a couple as part of a formal agreement within divorce or dissolution proceedings that is approved by the court (known as a consent order) or as part of a court order made within financial proceedings, provided that the transfer is pursuant to the order.

Spouses/civil partners are often shocked that CGT can apply to part of one party’s share of any gain in value in the former family home if that party has moved out of the home.  

The change to the rules provides that from 6 April 2023 when a spouse/civil partner retains an interest in the former family home, they will have the option of treating the period that they no longer lived in the family home as if it had been their only or main residence during that period and claim ‘Private Residence Relief’. However, if that spouse has acquired a new main residence, if they wish to claim Private Residence Relief on the former family home, that relief would be lost for that period on their new main residence. Retaining an interest in the home should therefore be considered carefully and advice taken.

From 6 April 2023, if an ex-spouse/civil partner transfers their interest in the former family home to their ex-spouse/civil partner and is to receive a percentage of the proceeds at a later date, they will be able to apply main residence relief to those proceeds when received. This will mean that CGT is not charged for any increase in value, even though they may not have lived in the home for many years.  

These changes will allow separating married couples/civil partners more time to consider and negotiate the division of assets but still maximise the CGT relief available. 

CGT should be considered at an early stage when separating. Expert tax advice may be required, particularly where couples have multiple properties or other assets. Taking advice will ensure that any tax relief available is maximised and claimed at the appropriate time.   

Unfortunately for couples that are cohabiting but not married or civil partners, the no gain no loss rule only applies to married couples or civil partners.

If you are going through a separation or divorce, or simply contemplating separation and would like initial advice, arrange an initial meeting with our family law solicitors at GoodLaw Solicitors. 

By Published On: March 17th, 2023Categories: Insights

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