We are sharing this update from ACCA, our professional body, for the interest of clients and contacts. The content is (c) ACCA

The annual exemption amount for capital gains tax will change, from £12,300 to £6,000 from April 2023 then £3,000 from April 2024. The government will legislate for these measures in Autumn Finance Bill 2022.

It has also been announced that the annual exemption amounts for most trustees will be reduced to £3,000 and £1,500 for tax years 2023/24 and 2024/25 respectively.

Capital gains tax: extends the period for no gain/no loss transfers to three years for couples who separate or divorce

The capital gains tax legislation dealing with the transfer of assets between an individual living with their spouse or civil partner is found at section 58 of Taxation of Chargeable Gains Act 1992.

This provides that transfers of assets between spouses and civil partners who are living together are made on a ‘no gain or no loss’ basis in any tax year in which they are living together. This means that any gains or losses from the transfer are deferred until the asset is disposed of by the receiving spouse or civil partner, who will be treated as having acquired the asset at the same original cost as the transferring spouse or civil partner.

When spouses or civil partners separate, no gain or no loss treatment is only available in relation to any disposals in the remainder of the tax year in which the separation happens. After that, transfers are treated as normal disposals for capital gains tax purposes.

Proposed revisions

Legislation will be introduced in Finance Bill 2022-23 which will provide that:

  • separating spouses or civil partners be given up to three years after the year they cease to live together in which to make no gain or no loss transfers
  • no gain or no loss treatment will also apply to assets that separating spouses or civil partners transfer between themselves as part of a formal divorce agreement
  • a spouse or civil partner who retains an interest in the former matrimonial home be given an option to claim Private Residence Relief (PRR) when it is sold
  • individuals who have transferred their interest in the former matrimonial home to their ex-spouse or civil partner and are entitled to receive a percentage of the proceeds when that home is eventually sold, be able to apply the same tax treatment to those proceeds when received that applied when they transferred their original interest in the home to their ex-spouse or civil partner.