Capital Gains Tax on Separation and Divorce: What You Need to Know
Understanding capital gains tax on separation and divorce is essential for couples navigating financial settlements.
Recent HMRC rule changes have extended relief periods and clarified how asset transfers are taxed, making it easier to avoid unexpected liabilities during this emotionally and financially complex time.
Capital Gains Tax on Separation and Divorce: Updated Rules for 2025
Since 6 April 2023, separating spouses and civil partners benefit from extended “no gain/no loss” treatment on asset transfers:
- Up to 3 years after the tax year of separation to transfer assets without triggering CGT
- Unlimited time to transfer assets if part of a formal divorce agreement
This means that even if the asset has increased in value, no CGT is payable at the time of transfer.
The recipient inherits the original base cost and CGT is only assessed upon future disposal.
Private Residence Relief and the Matrimonial Home
One of the most common concerns around capital gains tax on separation and divorce involves the family home.
If one party retains an interest and later sells, they may still claim Private Residence Relief (PRR), even if they no longer live there.
Additionally, if a spouse transfers their interest but retains rights to future sale proceeds, they can apply the same tax treatment to those proceeds as if they had sold the property themselves.
Asset Transfers and Connected Persons Rules
Even after separation, spouses and civil partners may be treated as “connected persons” under CGT rules.
This affects how market value is applied to transfers and can impact the calculation of gains or losses.
Understanding these nuances is key to managing capital gains tax on separation and divorce effectively.
Planning Financial Settlements Tax-Efficiently
With the extended relief window, couples have more flexibility to plan settlements without triggering a “dry tax charge”—where tax is due but no cash is received.
This is especially important when dividing investment portfolios, business shares, or second properties.
How Trueman Brown Can Help with Capital Gains Tax on Separation and Divorce
At Trueman Brown, we specialise in guiding clients through the tax implications of separation and divorce. Whether you’re transferring property, calculating CGT liabilities, or structuring settlements, we provide clear, compliant advice tailored to your situation.
📧 Email: mark@truemanbrown.co.uk 📞 Call: 01708 397262
FAQs: Capital Gains Tax on Separation and Divorce
Q: Do I pay CGT if I transfer assets to my ex-spouse?
A: Not if the transfer occurs within 3 years of separation or is part of a formal divorce agreement.
Q: Can I claim Private Residence Relief if I no longer live in the home?
A: Yes, if you retain an interest and later sell, PRR may still apply.
Q: What happens if I receive sale proceeds years later?
A: You can apply the same CGT treatment as when you originally transferred your interest.
Q: Are we still considered “connected persons” after separation?
A: Yes, until the divorce is finalised, which affects how CGT is calculated on transfers.
Q: Can Trueman Brown help with CGT calculations?
A: Absolutely—we offer tailored advice and documentation to support accurate reporting and compliance.
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