Divorce & The Tax Year
As the end of the tax year gets closer, it is important that all divorcing couples seek professional advice if they are considering a transfer of assets.
Tax issues are often last to be considered when in the divorce process, however the impact of tax on the final settlement should not be underestimated. This is because by planning the settlement and minimising tax cost within transfers, it allows the maximum amount for distribution between individuals.
Capital Gains Tax
In a divorce settlement, the Capital Gains Tax (CGT) can cause large implications for couples. This is because spouses are classed as ‘connected parties’, and the rule for this is in the current tax year of separation, the transfer of assets takes place in a ‘no gain, no loss’ basis, meaning that there is no Capital Gains Tax for either party.
However, gains arising in the following tax year of separation (but before Decree Absolute) are assessed on the transferor spouse. This means that transfer of assets between individuals should take place before the end of the tax year in which separation takes place.
For those spouses that do not separate until after 6th April will have up to 12 months to arrange with tax affairs.
Here at Mann & Co we offer specialist divorce services, and can assist and support you in anyway possible. Get in touch with one of our experts today.