Currently, divorcing couples have until the end of the tax year of the year of separation to pass assets to each other. This means that after the tax year has ended, assets may only be allowed to pass between spouses and civil partners at market value which can result in Capital Gains Tax (CGT) liabilities and add an additional layer of cost and stress for separating couples.
However, new legislation, coming into effect on the 6th of April 2023, will now give divorcing couples three years to do so on a no gain/no loss basis and unlimited time if the assets are the subject of a formal divorce agreement. The new legislation allows for divorcing couples to coordinate their assets in ease and at a lesser cost.
Furthermore, under the new legislation residence relief will be extended so that spouses who keep an interest in their matrimonial home will be entitled to the relief. This will also encompass deferred charge arrangements.
Couples who divorced during the current tax year will be eligible for no gain/no loss transfers in 2021/22 under the current legislation as these changes will take effect on April 6, 2023. Couples that separated before the 6th of April 2022 will only benefit if they wait until after 6 April 2023 to transfer assets.