Proposed Changes to CGT on Separation

In response to a recommendation by the Office of Tax Simplification the Government have introduced draft legislation for inclusion in Finance Bill 2023 that extends the no gain/no loss rule when a couple separate.

Under the current rules the no gain/no loss rule means that there is no CGT on transfers of assets between spouses or civil partners only applies up to the end of the tax year in which they separate. The divorce settlement or court order that transfers assets between the couple often takes place many months after the separation and may lead to CGT being payable.

The main change proposed is that separating spouses or civil partners will be given up to three years after the year they cease to live together in which to make no gain/no loss transfers. Most divorces would be concluded within this period.

No gain/no loss treatment will also apply to assets transferred as part of a formal divorce agreement.