When to transfer money or assets on divorce?

A capital payment to a spouse may have been agreed in your financial settlement and this will need to be paid at the specified time after the divorce is finalised. This may have been detailed in your Consent Order. This may involve releasing funds from deposit accounts or selling/transferring shares and other assets in order to meet the payment.

It is important that you don’t forget to take a look at the tax implications of this payment requirement as it can have a significant effect on the value that you (or your ex-spouse) finally achieve. For example, you may be required to transfer shares to your ex-spouse upon divorce. Transfers of assets between current spouses do not normally create tax charges — but a transfer to or from a person who is no longer your spouse because you are now divorced may do.

In normal circumstances, assets transferred between civil partners or spouses in the tax year during which they have lived together, including the year of separation, are exempt from Capital Gains Tax (CGT). However, from the end of the tax year of separation the situation changes and if you have large financial assets to be redistributed then you may want to take this into account. You should seek advice on this subject if it affects you, you don’t want to get this wrong, I am sure!

Careful financial planning and timing are important here. Tax positions and legislation can change regularly and the comments above may already have become out of date by the time you might go through a divorce of your own. Check with your accountant or financial adviser before making any changes to make sure that the legislation has not changed.

The tax year runs from the 06th April each year to the 05th April the following year, with most individual annual tax allowances being renewed each year. Each individual is taxed separately, so ensure that you take this into account with your negotiations. Your accountant or independent financial adviser (IFA) should be well placed to make sure you minimise the effects of tax.

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Speak to Churchouse Financial Planning Limited (or your independent financial adviser/ IFA) to help with advice on this issue. This statement is not individual advice and should not be relied on because each clients circumstances are different.

Keith Churchouse

Director of Churchouse Financial Planning Limited
Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority