The end of the tax year is fast approaching. This is a particularly important time for married couples or civil partners who have separated since 5 April last year, or are contemplating separation.
You do not usually have to pay Capital Gains Tax if you give assets to your husband, wife or civil partner. However, you may have to pay this tax on assets you transfer to your former partner after your relationship ends (i.e. after 5 April following separation). For this purpose, it is separation rather than the completion of a divorce that is important. The opportunity to transfer assets between spouses without capital gains tax consequences can be lost if the asset transfer takes place after the end of the tax year of separation.
If you have multiple properties, shareholdings, business assets – either in your sole name or in joint names – and transfers are not made between you in the tax year of separation, there could be an immediate tax charge if the property is transferred after the end of the tax year.
It could be possible to transfer properties/assets etc. prior to the end of the tax year in contemplation of a divorce, so as to try to avoid an immediate charge to tax. However, it is still important when seeking an overall financial settlement on divorce that the tax inherent in that asset is taken into consideration.
It is always worth taking legal advice before you separate – even more so at this time of year when the end of the tax year is in sight. It is also advisable to involve an accountant in relation to specific Capital Gains Tax and tax enquiries.
Sarah Walls is an associate in the family team in Exeter. Our family law team has been ranked as the best in Devon and Cornwall by Chambers and The Legal 500, the two leading independent legal guides. If you would like to discuss tax after divorce or any other family law issue, Sarah can be contacted on 01392 210700, or by email solicitors@stephens-scown.co.uk