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Proposed Change to Tax Regime for Separating Couples

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The Government has proposed a change of rules applying to the transfer of assets between spouses and civil partners who are separating. The proposed changes ensure fairer tax rules that give spouses more time to transfer assets between one another without receiving a likely charge of Capital Gains Tax (CGT). Capital gains is the profit a person makes when they sell or gift an asset which has increased in value. The proposed legislation will be presented in the Finance Bill 2022-23, and it will allow spouses or civil partners up to three years to make “no gain, no loss” transfers after they cease to live together. The “no gain, no loss” treatment will also apply to the assets that spouses transfer between one another as part of a financial settlement, if outside of this timeframe. Secondly, if a spouse holds a legal interest in the shared matrimonial home, they will be given an option to claim Private Residential Relief (PRR) when the home is sold even if they have not lived in the family home for some time. The provisions will also impact individuals who have transferred their interest in the family home to their former spouse and who are due to receive a payment representing a percentage of the equity when the house is sold.

The proposed changes are said to be coming into force in April 2023 though it is not clear from the information available at the moment whether the provisions will apply to couples who separated in the 2022/23 tax year (and previously).

This is a potential change which separating couples should be aware of and take advice from financial specialists. When considering financial outcomes for clients, the Burgess Mee team will discuss whether tax or other financial advice is necessary and put you in touch with specialists who can advise you.