Proposed increases to capital gains tax suggested by the Office for Tax Simplification in early November are likely to hit divorcing couples hard, UK law firm Royds Withy King has warned.
In most divorce cases, a physical separation cannot be delayed until a financial settlement has been finalised, leading to one of the parties agreeing to move elsewhere in the interim.
Whilst this may be the best decision when emotions are running high, it can create unforeseen and unnecessary tax liabilities, Simon Bassett, partner and head of family at Royds Withy King, explained.
“The CGT regime changed in April 2020, with the qualifying period for principal private residence (PPR relief) reduced to just nine months, lettings relief all but removed and, crucially, any tax payable in full within 30 days of the sale or transfer of an asset, known as a disposal,” he said.
“CGT can arise when certain assets are either sold or transferred between parties, even if no money is actually changing hands. As CGT is now payable in full within 30 days on such a sale or transfer, we are seeing separating couples struggling to raise the necessary funds within this tight timef...