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• October 7, 2025

Capital Gains Tax and Divorce: What You Need to Know

When couples separate or divorce, they often need to transfer assets — such as property, shares, or other valuables — between themselves. Normally, this can trigger Capital Gains Tax (CGT) if the asset has increased in value.

However, UK tax rules provide a “no gain/no loss” treatment. This means transfers between separating spouses or civil partners usually happen at the asset’s original value, so no CGT is payable at the time of transfer.

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Important Changes Since April 2023

From 6 April 2023:

• Couples have up to three years after the year of separation to transfer assets on a no gain/no loss basis.
• If the transfer is part of a formal divorce agreement, there’s no time limit.
• If one partner keeps an interest in the former home, they may still claim Private Residence Relief when it’s sold.

These changes give separating couples more time to organise their finances without unexpected tax charges.

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Why This Matters

This extended no gain/no loss period means you can:

• Transfer assets without worrying about an immediate CGT bill (“dry tax charge”).
• Avoid disputes about the exact disposal date.
• Simplify transfers without worrying about whether special CGT reliefs apply.

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Things to Watch Out For

While these rules are helpful, there are important exceptions:

• If cash is needed as part of the settlement, CGT may still apply.
• Overseas assets may trigger tax in another country.
• Some CGT reliefs (e.g., Business Asset Disposal Relief) may not apply after a no gain/no loss transfer.

For example, if both spouses hold business shares and one transfers their share to the other, only one lifetime relief limit may remain, possibly increasing the overall tax payable later.

Similarly, if property is transferred under no gain/no loss, the receiving spouse will take on the original purchase cost, which could create a bigger CGT liability if they sell later.

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The Bottom Line

Dividing assets in divorce isn’t just about fairness — it’s about understanding the tax impact. Planning ahead and getting expert advice can protect both parties from surprises and ensure a fair settlement.

If you’re going through separation or divorce, it’s wise to speak to a tax expert before agreeing any financial settlement.

If you have any questions about tax matters affecting separating couples, we’re here to help. Please feel free to get in touch.