For those who have made the decision over the Christmas break that their marriage is no longer working, then in addition to considering how any matrimonial assets should be divided, they should also be keeping an eye on the date if they want to avoid paying a share of those assets to the tax man.
Saving tax on divorce
The most important thing to know about tax on divorce is that when a couple are married and living together, if they want to transfer assets between each other they can do so without a charge to Capital Gains Tax (CGT) arising. This always remains the case when it comes to the matrimonial home, which will qualify as being tax-free on transfer even following divorce or separation provided it has been the couple’s main residence throughout the entire period of ownership.
What many couples unfortunately don’t appreciate is that when it comes to any additional properties, this tax benefit disappears at the end of the tax year following permanent separation and not on their divorce, which may be some time later. So, if a couple separate now but then do not decide that the relationship is over until six months later, by that time, because it will be after 5th April, they have already lost the ability to transfer assets between one another tax-free.
So for those couples who perhaps brought more than one property into the marriage or purchased a second property to rent out during the course of their marriage, they should take tax advice as soon as possible as the clock is ticking. It would seem that in an ideal world, particularly from a tax point of view, couples in this situation should therefore ideally wait to separate until 6th April or thereafter, which would then give them a whole year to plan the transfer of assets between each other should that be necessary.
How can Nelsons help?
If you need advice on separation, divorce or financial matters in general, please contact our expert Family Law team in Derby, Leicester and Nottingham on 0800 024 1976 or via our online form. The team will be happy to discuss your circumstances in more detail and give you information about the services that we can provide.