When is the best time to divorce financially and how can the time of year that you separate from your partner impact your finances?
The decision to divorce your partner is never going to be an easy decision to make.
Factors to consider
There are a number of different factors you might be thinking about when deciding the right time to broach the subject such as the time of year – is it a special time of year for you as a family such as Christmas or are your children in the middle of exams? These factors may all be taken into consideration, but you might not realise that the time of year that you separate from your partner could have an impact on your finances.
If you are suffering from any form of domestic abuse, we would always suggest you seek help as soon as possible to remove you from any potentially dangerous situations.
Joint property and investment finances on divorce
If you own property jointly, or other investments (including businesses) with your spouse other than the home that would be your principal main residence, then the timing of your separation can have an impact financially on divorce. This is due to the fact that there are different rules in relation to Capital Gains Tax for assets being transferred between spouses compared to assets being transferred between two people including separated spouses.
Capital Gains Tax
You can benefit from the Capital Gains Tax relief for spouses even if you are no longer living together for the whole of the tax year in which separation happens so that there is no immediate charge to Capital Gains Tax on the transfer of the asset.
Therefore, if you are transferring assets outside the tax year of separation there could be Capital Gains Tax to pay.
The tax year runs from the 6 April to the following 5 April. So if you are thinking of separating on the 1 April this would leave you with hardly any time to get your finances in order before the new tax year starts. As such now is a great time to start the process with plenty of time left in the tax year to transfer assets free from an immediate charge to Capital Gains Tax.
Other tax considerations
There are of course other tax considerations to take into account and we would always suggest you speak to a tax specialist if you have any specific queries. It is also important that it is understood that you can be considered separated even if you are still living under the same roof.