The first Monday of the year is known as “Divorce Day”. Solicitors returning to their desks after the Christmas break find they have a deluge of enquiries from people wanting to end their marriage. The festive period, and all the family tension it can entail, often proves the final straw.
However, if you are planning to end your marriage, you may want to hang on until April, says David Byers in The Sunday Times. “Timing is everything… if you want to separate, when should you do so without incurring a whopping tax bill?”
You may have reached the end of your tether over Christmas, but launch divorce proceedings now and you could land yourself with an avoidable tax bill. The problem is capital gains tax (CGT): the tax you pay on investment profits when you sell assets.
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HMRC allows married couples (and civil partners) to pass assets to each other without paying any CGT as long as they can prove they lived together at some stage during that tax year.
After your divorce you will have to pay CGT if you transfer assets to your ex-spouse. “If you start proceeding right now, you only have three months until the end of the tax year to take advantage of the exemption,” says Byers. “Then you lapse into a second tax year,” when, if you aren’t still living together, you lose that CGT perk.
Another reason to delay your split is that it could be about to get a lot cheaper to divorce. A bill is currently making its way through parliament that will create “no-fault” divorces. At present you can only divorce immediately for three reasons: “unreasonable behaviour”, adultery, or if you have been separated for two years.
The cost of divorce has been on the rise over the past few years, climbing from £1,280 in 2014 to £2,679 in 2018. The hope is that the simplified rules will save divorcing couples time and money on legal fees, says Marianna Hunt in The Daily Telegraph.
The housing market is also forecast to improve in 2020 following years of stagnation, which could help divorcing couples who are struggling to sell the marital home.
From April you will have nine months to sell a property you are no longer living in without incurring CGT. So separating couples may choose to delay separating until there is more movement in the housing market.
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