Capital Gains Tax (CGT) is payable on the disposal of an asset whether it is sold, gifted or whether you are ordered to transfer it as part of a court order. The “gain” is the difference in the value of the asset when it was acquired and its value when you dispose of it.
In the Budget, the annual CGT allowance (the amount of your “gain” upon which no CGT is payable) was frozen at £12,300 per annum until 2026.
Take Tax Advice
Capital Gains Tax isn’t usually high on the list of priorities for separating couples, however tax advice as well as legal advice should be taken at an early stage in the separation process to reduce the risk of you being left with an unexpected CGT liability.
Generally, assets can be transferred between husband and wife with no tax liability being incurred under the “no gain no loss” principle. However, this changes when a couple separates as they only have up until the end of the tax year in which they separate to transfer their assets to one another with no tax implications.
Exercise Caution with the Family Home
It is particularly important to exercise caution with the family home as it is very common for one party to vacate the family home on separation.
Historically, the spouse who moved out of the property had a window of 18 months in order to dispose of their financial interest in it, either by selling the property or transferring their interest to their spouse before CGT could become payable. In April 2020, this window was reduced to 9 months meaning that the timescales are now a lot tighter.
If you are considering a separation, it is important that you seek legal and tax advice at the earliest opportunity to understand the best solution for your circumstances.