Tax traps for separating couples

The government announced in its Autumn Finance Statement in 2013 that there will be a change in the rules on Capital Gains Tax (CGT) which could be a tax trap for divorcing couples.

Currently the person who moves out of the family home has three year tax relief if the property is transferred to their spouse/civil partner within that period. However, the Government announced that it is going to reduce that period of final exemption to only 18 months. It is also intended that this will be introduced retrospectively from 6 April 2014.

The main purpose of the final period of exemption was to provide an exempt period for those who were having difficulty in selling their property, for example the sale of the matrimonial home following divorce.

This change in the rules means that divorcing couples have significantly less time to resolve their finances if they are to avoid paying Capital Gains Tax. This may cause difficulties for couples especially those who are on good terms who do not think there is a particular rush to deal with their finances.

There is a limited exception from this reduction for disabled people and those having gone into long-term residential care.

 

 

 

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