Capital Gains Tax on Divorce, Dissolution or Separation

For this article, “divorce” is used as the term for legally ending a marriage or the dissolution of a civil partnership.  Separation means you are no longer living together as a couple but have not divorced.

What happens to your assets when you divorce or separate?  Be careful as HMRC has 2 X Help Sheet 281s on the subject.

Before 6 April 2024 - HMRC Help Sheet 281 (2022)

https://www.gov.uk/government/publications/husband-and-wife-civil-partners-divorce-dissolution-and-separation-hs281-self-assessment-helpsheet/hs281-capital-gains-tax-capital-civil-partners-and-spouses-2022

• If you legally divorce or only separate and transfer assets within 3 tax years of the end of the tax year in which you ‘split’, the transfer of assets is treated as “no gain/no loss” meaning transfers are capital gains tax free.
• If you legally divorce or remain separated (do not divorce) and transfer assets after 3 tax years of the end of the tax year in which you ‘split’, the transfer of assets is not treated as “no gain/no loss” meaning transfers are subject to capital gains tax.

After 6 April 2024 - HMRC Help Sheet 281 (2024)

https://www.gov.uk/government/publications/husband-and-wife-civil-partners-divorce-dissolution-and-separation-hs281-self-assessment-helpsheet/hs281-capital-gains-tax-civil-partners-and-spouses-2024

• If you legally divorce (with or without a court order on assets) or only separate and transfer assets within 3 tax years of the end of the tax year in which you ‘split’, the transfer of assets are treated as “ no gain/no loss” meaning transfers are capital gains tax free.
• If you remain separated (do not get divorced) and make gifts after 3 tax years of the end of the tax year in which you ‘split’, the transfer of assets is subject to capital gains tax.
• If you divorce (without a court order specifying asset transfer) and transfer assets after 3 tax years of the end of the tax year in which you ‘split’, the transfer of assets are subject to capital gains tax.
• New, Welcome Change:  If you divorce and make a transfer assets within a court order AT ANY TIME the transfer of assets is now treated as “no gain/no loss” meaning transfers are not subject to capital gains tax.

Care should be taken to make sure you get the correct legal and tax advice when transferring assets.

If in doubt, get divorced via a Court Order including the assets to be transferred as there is no longer any time limit.

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