24 March 2020
If you are considering separating from your spouse or partner, you need to be aware of the potential Capital Gains Tax liability which could affect you. You should consider obtaining advice from an accountant about how any separation could affect you. With effect from 6 April 2021, the period following separation when your main family home would still be treated as your principal private dwelling house for the purpose of assessing any Capital Gains Tax liability reduces from 18 months to 9 months. This change could give rise to a Capital Gains Tax liability. This should be taken into consideration in any financial settlement and when deciding if and when to separate in any tax year.
Change in relevant date for declaration and payment
With effect from 6 April 2020 individuals are no longer, in the event that there is a Capital Gains Tax liability, allowed to include details of any gain on their annual Tax Return and for this to be paid on 31 January. Instead an additional Tax Return will have to be submitted and the tax paid within 30 days of completion of the sale of a property. If a property is transferred from one spouse or partner to the other, the completion date will be the date on the Transfer or Declaration of Trust Deed.
Annual Exemption
Individuals have an annual exemption for Capital Gains Tax purposes. For the financial year ending 05.04.20 the allowance was £12,000. The limit for the financial year ending 05.04.21 has just been increased in The Budget to £12,300. This annual allowance, following any sale can help to reduce the liability.
You should therefore think carefully before making a decision about moving out of the Family Home. In the event that you are already separated, you would need to clarify the position in relation to the potential Capital Gains Tax liability before finalising any settlement in view, in particular, of the need to pay this liability. Our expert family lawyers recommend obtaining accountancy advice before making any decision about a financial settlement.
This is not legal advice; it is intended to provide information of general interest about current legal issues. You also would need to clarify the Capital Gains Tax position with an Accountant.
Should you require any further details in relation to financial issues in divorce, please contact our experienced family law and divorce lawyers Lynne Barton or Nicola Bennetts at Aldridge Brownlee LLP on 01202 294411, Kingsway House, 13 Christchurch Road, Bournemouth, Dorset, BH1 3JY, E-Mail: Lynne.Barton@absolicitors.com or Nicola.Bennetts@absolicitors.com for a fixed fee appointment.
