Divorce & Separation
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Tax on divorce is an area that most people probably don’t think about. But, it’s important that a client understands the impact to their individual tax situation when it comes to splitting/transferring assets.
Capital Gains Tax (CGT)
After a divorce has been finalised, ex-spouses may be liable to pay CGT on transferring their assets. As each individual has an annual exempt amount of £12,000 (2019/20), anything over this amount may be subject to these CGT.
The inter-spouse CGT free relief applies to separating couples but only until the end of the tax year of permanent separation and after that the relief is lost.
|Asset||Basic Rate Tax Payers||High Rate Tax Payers|
|Other (excluding disposal of cars, currency and belonging with a value of less than £6,000)||10%||20%|
Inheritance Tax (IHT)
Transfers between spouses are exempt from IHT. However, after a divorce has been finalised transfers between ex-spouses are treated as Potentially Exempt Transfers and will usually be exempt from IHT if the donor survives 7 years.
Although it is possible to transfer any unused percentage of the IHT nil rate band (NRB) from a deceased spouse or civil partner to the surviving spouse or civil partner, no transfer is possible where the first death occurs after the couple have divorced.