Tax and Financial Implications of Divorce

Tax on Divorce and Separation

The famous dictum that “the only two certainties in life are death and taxes” is certainly true when considering that tax issues rear their head in almost all aspects of family law where finances are at issue.

Areas where tax may need to be considered carefully include:

Specific examples in practice include:

  1. Considering an individual’s assets and liabilities and assessing the inherent tax liabilities associated with the vesting of an asset in the individual’s hands (eg shares or share options in an employer company) or with the sale of any of an individual’s assets;
  2. If one spouse or partner is to remain in the family home but the other is to continue to have a financial interest in the property, how best to structure that arrangement from a tax perspective;
  3. Dealing with the transfer from one spouse or partner to the other of any interest in a second home, in the family business or company or indeed any other asset of the relationship: here, the tax effect – and therefore the financial effect – for each party may vary greatly depending on whether they are married (or in a civil partnership) or divorced or separated at the time of the transfer;
  4. Pension splitting or sharing or accessing cash from pension funds to facilitate immediate financial provision;
  5. Tax credits and how a change in a family’s living arrangements may or will change entitlement;
  6. Capital Gains Tax (CGT) liabilities can impact heavily on your financial settlements and allowances on separation have now been reduced to just 18 months post separation.

In many of the above situations, the position will be more complicated if one party is a foreign national or non-UK domiciled. In the case of unmarried couples or a same sex couple not in a civil partnership, the tax rules on asset transfers, particularly with regards CGT and Inheritance Tax, are also different to those affecting married couples.

It is essential that you have expert advice that understands these issues. Rayden Solicitors will assist you in getting the correct advice. Contact Rayden Solicitors now.

Rayden Solicitors is committed to equality and diversity and in doing so supports and advises all members of our community.

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