Separation, divorce and maintenance payments
Although tax is probably the last thing on your mind when you are going through a separation or divorce, a change in your circumstances may affect the amount of tax you have to pay.
Separation or divorce from your spouse will not affect your personal allowance. You will be taxed on any income over your personal allowance for the tax year.
Transfer of assets
Transfers of capital assets between spouses in the year of separation are still covered by the Capital Gains Tax (CGT) transfer exemption. However, any assets transferred between the end of the tax year and the date of divorce will be subject to special CGT rules, and may be taxable. Transfers after divorce will be taxed in accordance with the normal CGT rules.
Generally gifts of assets are deemed to be exempt from inheritance tax up to the point of divorce. However, gifts made in a settlement under a divorce agreement are normally also accepted as not being made with gratuitous intent and are not normally charged to inheritance tax.
To the extent that any payments made are not exempt, they will normally be potentially exempt transfers. These will only be taxable if the person making the gift dies with seven years of the payment.
Maintenance payments
You may be able to get tax relief if your maintenance payments are made under a
- court order
- legally binding written agreement
- Child Support Agency (CSA) assessment.
If a court refers to an approval or satisfaction with some agreement already made or refers to an undertaking to pay, the payments will not qualify for tax relief.
This page was last reviewed on 03 April 2006. The information may not reflect changes in legislation made after this date.
This is only a guide to your tax position and should not be relied on in place of professional accounting or tax advice. Any calculated figures are illustrative and are based on the data you provided.
