Capital Gains Tax Impact of Divorce

The divorce itself does not usually have any major Capital Gains Tax implications. However CGT could arise on the transfer of assets between the ex-spouses. When a couple get married (or enter a civil partnership) there are some tax advantages as well as potential tax drawbacks. The main advantage is that they can transfer assets between themselves free of capital gains tax, and (usually) free of inheritance tax. On the downside though they can only have one main residence between the two of them. Therefore where a couple marry and each have their own houses, only one of these can qualify as the main residence for the purposes of claiming Principal Private Residence relief. When a couple separate in circumstances likely to be permanent it is at this point that the tax treatment for married couples (as above) stops. They can therefore then each have their own main residence and any transfers between them will be subject to capital gains tax. On divorce any asset transfers will therefore be subject to CGT given the couple will clearly not be living together.