Tax implications for divorcing couples 18 Feb 2021 | Sophie Brand
As the end of the Stamp Duty holiday looms on 31 March 2021, that is not the only deadline that separating and divorcing couples should have on their radar. In a marriage or civil partnership, either party can transfer assets to the other party with no tax consequence, provided they can prove that they lived together during the relevant tax year, and they have not separated. Post-divorce or separation however, that is not the case, and instead such transfers to an ex-spouse or ex-partner result in a Capital Gains Tax (CGT) liability on any estimated gain made by the ex-spouse from whom the asset is moved.
If you are in the process of divorce or separation, the rules stipulate that you have until the end of the tax year of separation (i.e. on or before 5 April), to transfer assets without a CGT consequence. This applies regardless of whether you continue to live together, having officially separated. Therefore if you separated on or after 6 April 2020, it is important you consider whether you need to transfer assets to your spouse or civil partner before 5 April 2021. Specialist advice from a family lawyer will be required as well as tax advice (see below).
In our experience, tax is often not one of the main considerations when a marriage or relationship breaks down, but the tax impact of a divorce or separation should not be underestimated. Seeking specialist tax advice at an early stage in the process is highly recommended, and can ensure that there are no unexpected tax consequences and that any unavoidable tax liabilities are mitigated as far as possible.
Written by Sophie Brand, Assistant Family Solicitor to Lisa Pepper.
Contact us today
For a free initial conversation call 020 7485 8811
Email us Send us an email and we’ll get back to you
News & InsightsVIEW ALL
27.4.2021What does divorce in your 60s...
The rise of ‘silver separators’ The latest divorce figures from the Office of National Statistics (ONS) show that divorce is...Read more
11.3.2021Financial responsibilities of father on divorce
What are the financial responsibilities of a father on divorce? The period drama Bridgerton, the runaway success of the winter,...Read more
24.2.2021Welfare of Child Remains Priority for...
If press reports are to be believed, the Kim Kardashian /Kanye West split will not lead to a custody battle...Read more
16.2.2021Divorce and the Family Home
What happens to the family house in a divorce? For separating and divorcing couples, the family home is often the...Read more
4.1.2021Divorcing couples shun the courts for ‘...
Divorcing couples are shunning the court process, opting for ‘private justice’ after the pandemic leads to huge backlogs in the...Read more
25.11.2020Christmas restrictions set to cause conflict...
Government plans to limit household mixing to three households over five days during the Christmas period will put a strain...Read more