How chargeable gains for spouses and civil partnerships changed at Spring Budget 2023

Those in the process of separating from their partner will be interested to hear about the new rules relating to chargeable gains for spouses and civil partnerships, writes Zeeshan Anwar, head of compliance at Dolan Accountancy.

Fairer, and further time to transfer without incurring CGT

Announced by the chancellor at Spring Budget 2023, the government stated that these changes to chargeable gains for spouses and civil partnerships will create a fairer process when it comes to distributing assets between those separating or divorcing.

The changes will give those involved more time to transfer assets between themselves without incurring Capital Gains Tax (CGT) charges, plus, there are new rules surrounding financial interest in former family homes following a separation.

Chargeable gains for spouses and civil partnerships -- what are the new rules from April?

Currently, legislation for the transfer of assets in this situation means that where spouses or civil partners separate, the no gain/no loss treatment is only applicable in relation to disposals made in the remainder of the tax year in which they cease to live together.

After that, transfers are treated as normal disposals for CGT purposes.

From April 2023, separating spouses or civil partners will be given up to three years after the year they cease to live together in which to make those no gains/no loss transfers.

The no gain/no loss treatment will also apply to assets that are transferred between the individuals as part of a formal divorce agreement.

These new rules have given a lot more leeway when it comes to the timeframe given. And that’s something that will certainly come as a relief for those going through a separation.

Case study

Let’s take an example.

Sid is currently going through a difficult separation and it is an especially complex proceeding that will take more time than expected.

Usually in this situation, an individual would try to rush through proceedings in order to prevent further costs on their assets caused by Capital Gains Tax.

However, this new extension will not only help Sid to avoid further depletion of household income via dry tax charges, but it will take away a lot of stress meaning that Sid can spend more time concentrating on divorce considerations, rather than CGT.

Finally, remember Private Residence Relief

As mentioned previously, there will also be certain rules that apply to those going through a separation who have maintained a financial interest in their former family home.

An individual in this situation will be given the option to claim Private Residence Relief when the home is sold. This means that the spouse or civil partner will avoid paying CGT on any profit made from the property.

Those who have transferred their interest in the former matrimonial home to their ex-partner and are entitled to receive a percentage of the proceeds when that home is eventually sold, will be able to apply the same tax treatment to those proceeds that applied when they transferred their original interest in the home to their ex-spouse or civil partner.