Married couples and civil partners can transfer assets such as property or shares between them without incurring capital gains tax under what is known as a ‘nil gain, nil loss’ process. However, when they separate the current rules only allow the divorcing couple to benefit from this treatment until the end of the tax year in which they separate. For example, a couple that separated in March 2022 could only transfer assets at ‘nil gain, nil loss’ up to 5 April 2022, meaning they could have less than one month to benefit from the favourable capital gains tax treatment of a ‘nil gain, nil loss’ transfer. Following the year of separation, transfers of assets between the divorcing couple could result in unexpected capital gains tax charges. 

The Government have now released draft legislation, which is expected to be passed, on the back of the recommendations by the Office of Tax Simplification which will allow divorcing couples more time to arrange their affairs . From 6 April 2023, divorcing couples will have a more generous window of up to three tax years from the year in which they separate, and unlimited time if the assets are the subject of a formal divorce agreement, to transfer assets on a ‘nil gain, nil loss’ basis. 

In addition, Principal Private Residence relief may be available for individuals who leave the marital home, but retain an interest in it while their former spouse or civil partner is living there. 

The changes will therefore remove tax burdens from many divorcing couples from next year and make fairer the process for those spouses who are divorcing and distributing assets between themselves. 

If you have any questions on these capital gains tax changes then do get in touch via email Emily.hillier@shawgibbs.com or call 01865 292 200.