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    TaxKilnUK tax guidance
    TaxKilnUK tax guidance

    Divorce + tax → CGT spouse exemption (FA 2023)

    CGT Spouse Exemption — FA 2023 Reform (3-Year Window + Court-Order Extension)

    Pre-FA 2023, CGT spouse exemption (no gain / no loss treatment under TCGA 1992 s.58) was available only while spouses were 'living together' under TCGA 1992 s.288 — meaning the exemption ceased at separation and only carried into the rest of the separation tax year. From 6 April 2023, FA 2023 extended this: no-gain-no-loss treatment now applies for 3 tax years following the year of separation (TCGA 1992 s.58(1C)), and indefinitely beyond that window for transfers made under a formal court order or separation agreement (s.58(1D)). For property transfers where the transferring spouse continues to occupy the principal home until sale, the extension can run far beyond 3 years.

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    Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact HMRC. Read our editorial scope →

    In plain English

    Married couples and civil partners can transfer assets between each other without triggering Capital Gains Tax — the 'no gain / no loss' rule under TCGA 1992 s.58. The transferee inherits the original base cost; CGT is only triggered when they later dispose of the asset to a third party. Before 6 April 2023, this exemption was tied to 'living together' under TCGA 1992 s.288. Once spouses separated, the exemption only continued until the end of that tax year. Couples separating in March faced a punitive cliff-edge — weeks to restructure significant assets before transfers triggered CGT at full market value. FA 2023 fixed this. From 6 April 2023, the no-gain-no-loss window runs for 3 tax years AFTER the tax year of separation. And where transfers are made under a court order or formal separation agreement — particularly common for the family home — there is no time limit at all. A spouse who moves out and transfers their interest in the family home to the occupying ex-spouse under court order can do so 10 years later without triggering CGT on the transfer. This reform doesn't help cohabitees — see our cohabitation tax gap page. Unmarried couples never had a spouse exemption to extend.

    How it works

    Pre-FA 2023 position

    TCGA 1992 s.58 gave no-gain-no-loss treatment to transfers between spouses 'living together' (s.288). Separation ended this — but s.58 transfers within the rest of the tax year of separation were still covered. Couples separating in late tax year had little or no window; couples separating early in the year had ~12 months.

    Post-FA 2023 standard 3-year window (s.58(1C))

    From 6 April 2023, no-gain-no-loss treatment continues for the 3 tax years following the year of separation. So a couple separating in 2025/26 (any date in that tax year) can transfer assets between themselves under s.58 right up to 5 April 2029. This applies regardless of whether a formal court order or separation agreement exists.

    Post-FA 2023 court-order extension (s.58(1D))

    Where transfers are made pursuant to a formal order of a court (or a formal separation agreement), the 3-year limit does not apply. The extension can run indefinitely. This is particularly relevant to property transfers — a spouse who moves out and transfers their interest in the family home to the occupying ex-spouse can do so years or decades later under a court order without triggering CGT.

    What 'separation' means

    Separation for CGT purposes follows the family-law concept — actual physical separation with intention to permanently separate. HMRC follows the date on which spouses started living apart on a permanent basis. A trial separation that resumes does not crystallise — the couple remained 'living together' for tax purposes.

    Who this applies to + key conditions

    Statute + manual references

    Primary: Taxation of Chargeable Gains Act 1992 s.58 (no gain / no loss disposals between spouses / civil partners), as amended by Finance Act 2023.

    Related: TCGA 1992 s.58(1C) — 3-tax-year extension post-separation (FA 2023); TCGA 1992 s.58(1D) — unlimited extension for court-ordered transfers (FA 2023); TCGA 1992 s.288 — 'living together' definition; TCGA 1992 s.225B — PPR extension for departing spouse; Finance Act 2023 — enacting reform

    HMRC manual: CG22000+ (transfers between spouses); CG22300+ (separation); CG65356+ (PPR on separation)

    Common mistakes + traps

    Worked example

    Helen + James, separating 1 September 2025, married 18 years

    Helen + James jointly own: family home (£800k, base cost £450k, gain £350k); investment portfolio (£300k, base cost £180k, gain £120k); Helen's family company shares she gifted James as a director shareholder (£500k market value, base cost £1, gain £499,999).

    1. Separation 1 September 2025 (tax year 2025/26). Pre-FA 2023: any transfers had to occur by 5 April 2026 — 7-month window.
    2. Post-FA 2023 standard window (s.58(1C)): no-gain-no-loss treatment until 5 April 2029 (3 tax years after 2025/26).
    3. James transfers his 50% of the family home to Helen on 1 March 2027 (within standard window): s.58 applies — no CGT on transfer; Helen inherits James's £225k base cost on her newly-acquired 50%.
    4. Investment portfolio split on 1 June 2027: Helen takes 100%; James takes equivalent value from other assets. s.58 applies — no CGT on transfer.
    5. Family company share transfer back to Helen on 1 June 2030 (>3 years after separation): standard window expired BUT court order from financial-remedy proceedings pursuant to the agreement covers it under s.58(1D) — no CGT on transfer.
    6. Helen's eventual disposal of the inherited 50% home interest at £600k market value (10 years later): CGT calculated by reference to James's original £225k base cost, not the £400k market value at transfer.

    Outcome: All three transfers achieve no-gain-no-loss treatment under FA 2023 reform. Total CGT crystallised on transfers: zero. Pre-FA 2023, only the home transfer would have qualified, and only if completed by 5 April 2026.

    How this connects to the rest of the framework

    Property settlement + PPR →

    Property transfers between separating spouses use s.58 plus s.225B PPR extension for the departing spouse.

    Business shares on divorce →

    Family company share transfers within 3-year window or under court order use s.58 — no CGT crystallised on transfer.

    Pension splitting (PSO/PAO/offsetting) →

    Pension splitting uses a separate tax-free transfer regime under Welfare Reform and Pensions Act 1999 — not s.58.

    Cohabitation tax gap →

    Cohabitees CANNOT use s.58 — transfers between unmarried couples are full-CGT disposals at market value.

    Scenarios + anti-charlatan →

    Scenario set shows FA 2023 window applied to short-marriage, family-home, and family-business divorces.

    /tax-reliefs/business-asset-disposal-relief →

    BADR rate trajectory (10% → 14% → 18%) affects timing of family-company-share transfers under s.58 window.

    Frequently asked questions

    What happens if I miss the Self Assessment deadline?+
    The Self Assessment deadline is 31 January (online filing) for the previous tax year. Miss it and HMRC apply an automatic £100 penalty. Beyond that: £10 per day from 3 months late (capped at £900), 5% of tax due at 6 months late, and another 5% at 12 months late, under Schedule 55 of the Taxes Management Act 1970. If you have a genuine reason (serious illness, bereavement, technical issue with HMRC's systems) you can appeal with evidence; HMRC accepts reasonable excuse appeals in most genuine cases.
    Do I need an accountant or can I file Self Assessment myself?+
    Legally you can file Self Assessment yourself via gov.uk for free, most simple sole-trader returns (single income source, basic expenses) are realistic to self-file. An accountant adds real value when: your trading profit is above £40,000 (extraction-strategy decisions matter), you have multiple income streams (PAYE + self-employment + property + dividends), you've crossed the £90,000 VAT threshold, you're considering incorporation, or you have an HMRC enquiry. Expect to pay £400-£1,500/year for a typical sole-trader accountant; the cost is itself a deductible expense.
    How do payments on account work?+
    When your Self Assessment tax bill exceeds £1,000 for the first time, HMRC requires payments on account toward NEXT year's tax. Half the current bill is due 31 January (alongside the current bill); the other half is due 31 July. So your first January after crossing the threshold can hit with a double-bill: last year's balance + first payment on account. Adjust via Form SA303 if you expect next year's income to drop substantially. Payments on account don't apply if more than 80% of your tax is collected via PAYE.
    Does FA 2023 apply to couples who separated before 6 April 2023?+
    Yes — the reform applies to transfers made on or after 6 April 2023, regardless of separation date. A couple who separated in 2021 can use the extended window for transfers from April 2023 onwards.
    Does the court-order extension require a financial remedy order?+
    It covers transfers pursuant to a court order or formal separation agreement, including financial remedy orders, consent orders, and qualifying separation agreements. Informal arrangements do not qualify.
    What about cohabitees?+
    FA 2023 reform only helps married couples and civil partners. Cohabitees have never had spouse exemption and FA 2023 doesn't change that. See cohabitation tax gap page.

    Free + regulated-body resources

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