Laura Suter, head of personal finance at AJ Bell, comments on changes to the CGT process for divorcing couples:
“This change to a niche area of tax rules will be a big relief for couples who are divorcing and have assets and investments they need to transfer between them. The current rules mean that you only have the remainder of the tax year in which you get divorced to make transfers of investments or assets without it being considered for CGT purposes.
“It means that before now there has been a bizarre case where it’s more beneficial to get divorced in the new tax year in April, as it gives you more time to sort your financial. Likewise if you were ‘unlucky’ enough to get divorced in late March you’d face a dash to get your financial affairs in line before the April 5th deadline. Clearly basing your divorce around the tax year system isn’t practical, so this fix will avoid a lot of hassle and stress.
“Now couples will be given three years from when they divorce to make these transfers, saving on potentially large tax bills if they didn’t transfer assets in time and giving more breathing space. The rule change follows a recommendation from the Office for Tax Simplication in May last year. The OTS has also recommended slashing the tax-free allowance and raising rates for CGT, but investors will be breathing a sigh of relief that the Government hasn’t adopted those policies yet.”
