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Divorce & Separation

There's a lot to consider when it comes to advising a client through divorce or separation.

We've got support that could help.

Help your clients through separation and divorce

Start the conversation with this guide.

Transferring assets

Tax on divorce is an area that most people probably don’t think about. But, it’s important that a client understands the impact to their individual tax situation when it comes to splitting/transferring assets.

Capital Gains Tax (CGT)

After a divorce has been finalised, ex-spouses may be liable to pay CGT on transferring their assets.  As each individual has an annual exempt amount of £12,000 (2019/20), anything over this amount may be subject to these CGT.

The inter-spouse CGT free relief applies to separating couples but only until the end of the tax year of permanent separation and after that the relief is lost.

Asset Basic Rate Tax Payers High Rate Tax Payers
Property 18% 28%
Other (excluding disposal of cars, currency and belonging with a value of less than £6,000) 10% 20%

Inheritance Tax (IHT)

Transfers between spouses are exempt from IHT. However, after a divorce has been finalised transfers between ex-spouses are treated as Potentially Exempt Transfers and will usually be exempt from IHT if the donor survives 7 years.

Although it is possible to transfer any unused percentage of the IHT nil rate band (NRB) from a deceased spouse or civil partner to the surviving spouse or civil partner, no transfer is possible where the first death occurs after the couple have divorced.

"Prudential" is a trading name of Prudential Distribution Limited. Prudential Distribution Limited is registered in Scotland. Registered Office at Craigforth, Stirling FK9 4UE. Registered number SC212640. Authorised and regulated by the Financial Conduct Authority. Prudential Distribution Limited is part of the same corporate group as the Prudential Assurance Company. The Prudential Assurance Company and Prudential Distribution Limited are direct/indirect subsidiaries of M&G plc, a company incorporated in the United Kingdom. These companies are not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America or Prudential plc, an international group incorporated in the United Kingdom.