Autus Newsletter » Autumn 2022
No-fault divorce: don’t skip on advice
The number of couples filing for divorce or
dissolution has surged after simpler no fault
divorce laws came into force in April. But the
simpler process shouldn’t mean cutting corners
on financial advice.
S pouses or civil partners can now file for divorce (or dissolution for civil partners) jointly online, stating irretrievable differences. Before, one partner needed to prove the other had acted unreasonably or committed adultery. Online divorce applications have risen four-fold from a low of 2,000 a month to 8,000 a month.
While these divorces may be streamlined, separating couples should still seek financial advice, particularly if they are splitting assets like property and pensions.
Evidence suggests that fewer than two in ten divorces have pension sharing orders, although these are often the most valuable financial asset, after a family home.
Although there is normally no CGT on the sale of a primary residence, if a couple splits, and one now lives elsewhere, this tax might apply. However, if the property is transferred within the tax year of separation no CGT is due. This makes it important to get the timing of a sale or transfer right, as it could potentially result in a saving of thousands of pounds.
New rules from April 2023 should make this aspect of life easier for divorcing couples. The parties will have up to three years to make what are known as ‘no gain, no loss’ transfers of assets between themselves after they stop living together.
These changes should make the CGT rules fairer and give spouses and partners more time to negotiate a fair split of assets, rather than rushing proceedings to meet an artificial tax timetable. The new legislation will also introduce some rules for those who maintain a financial interest in the matrimonial home after separation. This will allow a spouse to claim private residence relief (PRR) when it is sold, meaning they won’t have to pay CGT on this transaction.
S pouses or civil partners can now file for divorce (or dissolution for civil partners) jointly online, stating irretrievable differences. Before, one partner needed to prove the other had acted unreasonably or committed adultery. Online divorce applications have risen four-fold from a low of 2,000 a month to 8,000 a month.
While these divorces may be streamlined, separating couples should still seek financial advice, particularly if they are splitting assets like property and pensions.
Evidence suggests that fewer than two in ten divorces have pension sharing orders, although these are often the most valuable financial asset, after a family home.
CGT considerations
Couples who own property jointly may also have capital gains tax (CGT) considerations, particularly if one partner is transferring their share to their former spouse.Although there is normally no CGT on the sale of a primary residence, if a couple splits, and one now lives elsewhere, this tax might apply. However, if the property is transferred within the tax year of separation no CGT is due. This makes it important to get the timing of a sale or transfer right, as it could potentially result in a saving of thousands of pounds.
New rules from April 2023 should make this aspect of life easier for divorcing couples. The parties will have up to three years to make what are known as ‘no gain, no loss’ transfers of assets between themselves after they stop living together.
These changes should make the CGT rules fairer and give spouses and partners more time to negotiate a fair split of assets, rather than rushing proceedings to meet an artificial tax timetable. The new legislation will also introduce some rules for those who maintain a financial interest in the matrimonial home after separation. This will allow a spouse to claim private residence relief (PRR) when it is sold, meaning they won’t have to pay CGT on this transaction.
* The Financial Conduct Authority does not regulate tax advice. Tax treatment varies according to individual circumstances and is subject to change.