HMRC's 'L-day' policy paper, 'Capital Gains Tax: separation and divorce', proposes to extend the time limits for transferring assets at no-gain no loss between separating partners from the year of separation to the three following years, or, it will be unlimited if part of a formal divorce agreement.

This change broadens the tax reliefs for Divorcing and separating spouses by providing greater time to split up their matrimonial assets and provides a greater level of fairness compared to the existing rules which provided a very tight timeframe in order to reveive tax relief. It is proposed to

  • Allow three years after the end of the year in which they cease to live together to transfer assets between them at no gain, no loss for CGT purposes.
  • Allow unlimited time to transfer assets between them at no gain, no loss for CGT purposes when that transfer is as part of a formal divorce agreement.
  • Where an individual has maintained a financial interest in the family home following separation that individual will have the option to claim Private Residence Relief when that home is sold.
  • Individuals who have transferred their interest in the matrimonial home to their ex-spouse or civil partner and in return are entitled to receive a proportion of the sale proceeds when sold, are able to treat the later sale receipt as a disposal of their matrimonial home and claim any available relief accordingly.

Draft legislation is proposed for inclusion in Finance Bill 2023. The measure will to apply to disposals made on or after 6 April 2023.

Useful guides on this topic

Divorce & Separation: Toolkit
A summary of the tax implications which can arise on divorce and separation. 

PRR: Private Residence Relief
What is Private Residence relief (PRR)? What are the qualifying conditions? Can you claim relief on two homes? How do you claim PRR? Can you claim PRR if you develop your garden?

PRR: Private Residence Relief: At a glance (Freeview)
An 'At a glance' guide to Capital Gains Tax (CGT) relief on the disposal of your own home.

External links

Capital Gains Tax: separation and divorce

Capital Gains Tax: separation and divorce – draft legislation

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