Separation and divorce

Tax consequences of marriage breakdown.

Michaelides Warner can advise on the tax implications of separation and divorce, and offer practical guidance to individuals in Hammersmith and beyond.

It is an unfortunate fact of modern life that many marriages do not survive. When separation, divorce, or dissolution occurs, there will almost inevitably be some tax consequences.

Allowances

The married couple’s allowance only applies for those couples in which at least one spouse or civil partner was born before 6 April 1935. The allowance ceases at the end of the tax year in which separation occurs.

Maintenance payments

Maintenance payments qualify for tax relief only where a spouse or civil partner or former spouse or former civil partner was born before 6 April 1935 and only if they are legally enforceable. This will be the case if they are made under a court order, a Child Support Agency assessment, or a legal deed of separation. Such maintenance payments must be made to the divorced or separated spouse or civil partner (if they are not remarried, or have not entered into a new civil partnership) for the benefit of him or her or of your child under twenty-one living with him or her.

The maximum tax reduction available is £326.

Maintenance payments received do not count as taxable income.

Transferring assets

Assets transferred between spouses or civil partners in a tax year during which they have lived together, including the year of separation, are exempt from capital gains tax (CGT) and inheritance tax.

From the end of the year of separation until the decree absolute, the former spouses or civil partners are still regarded as connected persons for CGT purposes, and therefore all transfers between them will be treated for tax as if made at full market value, even if no consideration changes hands.

Thereafter, transfers will be treated as ‘at arm’s length’ and therefore transfers will, for CGT purposes, be treated as disposals or acquisitions for only such amount as changed hands.

If you are in the Hammersmith area and would like advice on the tax implications of separation or divorce, contact Michaelides Warner today.

Aside image

Accountancy services tailored to you.

Find out more »

Aside image

Are you tired of bookkeeping?

Find out more »

Aside image

Is your business just starting up?

Find out more »

Aside image

Are you paying the right amount of VAT?

Find out more »

Aside image

Struggling with your self assessment tax return?

Find out more »

Aside image

Looking for more than just compliance services?

Find out more »

Why not register to receive our Monthly Newswire?

Once a month we'll send you an email packed full of essential business news and handy tax tips to help save you money.

Sign up now