Divorcing couples and capital gains tax

Posted 7 November 2019 | Tax Planning


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HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

At present you have 18 months to sell your home after moving out before you have to pay a capital gains tax. However, that time period will be reduced to nine months from April 2020.

You do not usually have to pay Capital Gains Tax (CGT)if you give, or otherwise dispose of, assets to your husband, wife or civil partner. However you may well have to pay it if you transfer or sell assets after your relationship ends.

Your family home is often your highest value asset, and generally the transfer of the home between partners or spouses, would not be a chargeable disposal. However, in the case of divorce, the family home ceases to be the main residence of the spouse or partner who leaves it following separation.

Currently, the final 18 months following the departure of one partner, (the exemption period), will still qualify as a period of deemed occupation for principle private residence relief (PPR). This allows for the ownership of the property to be transferred, or for the property to be sold, within this period, exempt of capital gains tax.

If the family home is sold or transferred more than 18 months after one spouse or partner vacated the property, and the value of the home has increased, part of this gain in value will be taxable. How much tax is payable will partly depend upon any capital gains tax annual exemption available.

The person remaining in the home will still get full PPR as they have lived in it for the entire time of ownership so, unless you have an agreement in place, the person who vacated the property will be the one bearing the CGT bill, potentially leaving them disadvantaged.

As announced in the 2018 Autumn Statement, these rules are changing and from 2020 there will only be a nine-month exemption period. This will put further pressure on an already difficult situation.

Couples contemplating separation or divorce should seek advice before moving out of the property if possible, or at as early a stage as they can. Obtaining tailored advice in relation to any potential capital gains tax liability you may face and how best to mitigate this if key.


This article is for general information purposes only. For specific tax advice please speak to an accountant or tax specialist.

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