Chartered Accountants of Poynton, Cheshire

It is a sad fact that some marriages or civil partnerships will fail and there are tax implications of the split.

Capital gains tax

When married, a couple can normally transfer capital assets between themselves on a no gain/no loss basis, which means no Capital gains tax (CGT) is due. This applies up to and including the tax year of the separation.

Care needs to be taken with the couple's principal private residence (PPR), which is usually the matrimonial home. The PPR is usually CGT tax-free on the sale but if the financial aspects of the divorce take a long time to resolve, normally three or more years, this tax-free status may no longer apply.

The CGT considerations could be vital on any second or holiday home, or when splitting or selling a family business.

Income tax

Since both parties are taxed separately under self-assessment, income tax does not usually cause the same problems as CGT.

Any earned income, e.g., from a job, will remain taxed on the spouse that earns it.

More care might be needed with investment income, such as dividends and bank interest.

Often, assets held jointly in a marriage will be taxed accordingly. Any split of these assets post-divorce needs to be correctly reflected on the spouse's tax returns.

Pension funds and trusts

This is often the most complex area in any divorce and you will need specialist advice on the split of any pension fund. There are tax implications to splitting any family trust that might be in place.

We will be pleased to advise you on tne tax implications of a divorce and work with your legal representatives as appropriate.