Separation and Divorce – An Accountants View

McDade Roberts help our clients plan financially from birth to probate and everything in between. We help to plan and manage personal and business finances, whatever happens along the journey of life.

Marriage is a big milestone for many but it is an unfortunate fact of modern life that some marriages do not survive. When separation, divorce, or dissolution occurs, there will almost inevitably be tax consequences so why not let us help you navigate any rocky times you may be going through.

Marriage 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.

McDade Roberts Can Help

Marriage breakdown can be an emotional and difficult time in your life. Don't add to the stress by trying to understand all the tax implications on your own. We are here to help. Please call us if you would like further help or advice in this area.