From 6th April 2023 significant changes to Capital Gains Tax came into force. Here we look at how these impact separating and divorcing couples and any benefits gained from the new measures.
What does the new legislation mean?
From the 6th April 2023, the new rules apply.
The first is in relation to the period of time couples can transfer assets to each other without creating tax charge.
The second is an extension of “Principal Private Residence Relief”.
Transferral of assets.
The new measures mean that any separating couple (spouse or civil partner) can transfer any assets between parties with the benefit of a “no gain/no loss” exemption, either:-
3 years after the end of the tax year in which the parties stopped living together,
On the date the couple receives a Final Order in their divorce or Certificate of Dissolution in respect of a Civil Partnership, whichever is the earlier.
What happens when I sell the family home?
In circumstances where the “no gain/no loss” treatment does not apply for the family home, there remains the possibility of “Principal Private Residence Relief” which may be available to divorcing couples, covered in our previous blog, Capital Gains Tax and the Family Home.
Where one person leaves the family home and the other continues to live in the property,new rules have extended Private Residence Relief in circumstances where:
· The departing spouse/civil partner dispose of their interest to someone other than the remaining spouse/civil partner. Previously this was only available on transfers to the remaining spouse/civil partner.
· They receive deferred proceeds on the disposal of their home under a ‘deferred sale agreement order’.
New Capital Gains Tax allowance.
Whilst the above will be good news for many, the annual tax-free allowance for capital gains tax has been reduced from £12,300 to £6,000 from 6th April 2023.
How will this affect me?
Any property, land, or other investments you own that are sold as part of the divorce settlement that are not covered by the reliefs mentioned above will attract tax once you have exceeded your tax-free allowance of £6,000.
This change in tax relief is more than half of the previous annual exempt amount and therefore may reduce any residual capital you were expecting to receive on divorce.
How much will I have to pay?
This will depend on your individual assets and the terms of your divorce settlement.
Getting the help you need.
Our team at Grigg’s Law will be happy to help you in seeking professional tax accountancy advice on what the liability could be.
Such information is vital to have upfront before any negotiations start as it can be a considerable liability, which could reduce the residual capital payment you were expecting to receive. This may then have an impact on your future “needs” moving forward.
Once we have received the tax advice, we will help you to make the right choices to meet you and your family’s needs.
We’ll keep everything simple and straightforward. No jargon. No waffle, just good advice.
You can book a Zoom appointment with one of our team via our website www.familysolicitorcornwall.com
And to help us understand your needs, there’s an initial questionnaire we’d love you to complete.