Private Client blog
Opinions and insights from our Private Client team
Search site
Contact our offices
Make an enquiry
Private Client blog
Opinions and insights from our Private Client team
We often get asked about the tax situation on divorce. Whilst there is no one size fits all, the following is a general outline of the common tax issues that arise on a divorce or separation. Advice should always be sought at an early stage and a plan put in place. Roythornes’ Private Client and Tax Department are on hand to assist.
While married or in a civil partnership, any transfer of assets between the couple is deemed to be on a “no gain no loss basis” for CGT (see below).
If a marriage or civil partnership breaks down and one of the couple leaves the family home, that person can continue to be treated as occupying the family home for the purposes of Principal Private Residence Relief (PPRR), provided that all the following apply:
This treatment is necessary, because once a divorce or dissolution becomes final, CGT can apply to a transfer of assets between the former couple.
Mesher Orders can help, but they require careful planning and advice.
Individuals who are married and are living together can transfer chargeable assets between themselves without any CGT arising. For example, if a wife is holding an asset that has an unrealised capital gain, she can transfer the asset (or part of it) to her husband without the disposal giving rise to CGT. Essentially, the recipient is deemed to have purchased the asset for the same price that their spouse originally paid for it.
The phrase “living together” is defined in statue, which treats married couples as living together unless:
All three alternatives require that the spouses or civil partners be separated, that is, that the marriage or civil partnership should have broken down. If it has not broken down but the couple do not live in the same house they are still treated as living together for CGT purposes.
When a married couple does separate, they are still considered connected parties for CGT until the date of the decree absolute, which means transfers happen at market value.
A transfer that occurs in the tax year of separation is still treated as being made on a no gain no loss basis. A transfer of an asset which takes place after the end of the year in which separation occurs will take place at market value.
There is no general exemption from SDLT on a transfer between spouses. However, transactions in connection with divorce are exempt if it is:
The last of these is quite broad in scope, and leaves room for interpretation.
Transfers between spouses are exempt from IHT (though there are restrictions if the recipient is not UK domiciled and has not elected to be UK domiciled for UK IHT). This exemption continues to apply until the date of the decree absolute.
Transfers after that date are Potentially Exempt Transfers, unless specific exemptions apply, and need to be survived by seven years to be free from the estate for the purposes of IHT.
Clicking the Accept All button means you are accepting analytics and third-party cookies (check the full list). We use cookies to optimise site functionality and give you the best possible experience. To control which cookies are set, click Settings.
Our use of cookies.
You can learn more detailed information in our Privacy Policy
Some cookies are essential, whilst others help us improve your experience by providing insights into how the site is being used. The technology to maintain this privacy management relies on cookie identifiers. Removing or resetting your browser cookies will reset these preferences.
Essential Cookies
These cookies enable core website functionality, and can only be disabled by changing your browser preferences.
Google Analytics cookies help us to understand your experience of the website and do not store any personal data. Click here for a full list of Google Analytics cookies used on this site.
Third-Party cookies are set by our partners and help us to improve your experience of the website. Click here for a full list of third-party plugins used on this site.
Comments