DIVORCE does not have to be devastating when handled correctly. As always, September is a busy time for divorce solicitors after that last family holiday and a sort of ‘new term, new start’ mentality.
With good advice, agreements set from the start and, above all else, if there are children involved making sure they are protected and cared for, it can be the start of the next chapter.
Some changes have been announced, which will make sorting finances out ease the capital gains tax burden for separating couples.
Capital Gains Tax is paid on any profit when an asset is sold and does not only apply to property. It can also apply to possessions, a business, shares or bonds. It also applies to assets ‘disposed’ of or given as gifts or swapped.
With the recent changes, which are part of the Finance Bill 2022-2023, from next April couples will have more time to work out their finances and no longer have to settle their estates in the 12 months after divorce or face a bill for capital gains.
The plans will also make things easier by giving separating spouses and civil partners longer to make no gain/no loss transfers of assets.
In addition, if the assets are the subject of a formal divorce agreement an unlimited time will be given to the separating couple.
Changes to be introduced from April 6, 2023 include:
• separating spouses or civil partners to be given up to three years after the year they cease to live together in which to make no gain or no loss transfers
• no gain/no loss treatment will also apply to assets that separating spouses or civil partners transfer between themselves as part of a formal court order, so if one party transfers interest in the former matrimonial home to their ex they will get the same tax treatment when it is sold.
• a spouse or civil partner who retains an interest in a previously shared matrimonial home can claim Private Residence Relief when it is sold.
Currently, during the year of separation and once the tax year ends the divorcing couple lose any benefits of the no gain/no loss rule and can face big tax bills.
Solicitors say the new rule will remove the pressure on couples to get things done to an inflexible and often unrealistic end of tax year deadline.
“Often at this time of year we see couples start the divorce process and trying to achieve everything before the April tax year deadline can be tricky,” says divorce solicitor Emma Kendall.
“Now with no-fault divorce things are getting easier for families, but still the tax year deadline was looming and so we welcome this change and hopefully the end of the tax bills we often see at the end of the divorce process which are taken from the marital settlement.
“If a couple initiates divorce in the autumn months it’s not long before the no gain/no loss deadline is upon them and while some say it focuses the mind, for others it is an unnecessary stress.
“With court dates still playing covid catch up, or if there are complex financial settlements to sort out an arbitrary deadline does no one any favours and so we look forward to the changes next year.”
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