Divorcing couples: beware the capital gains tax trap

an article by Kate Francis for the OUT-LAW blog from Pinsent Masons

A change to the capital gains tax (CGT) rules from April 2020 means divorcing or separating couples in the UK will have a shorter period of time in which to sell their interest in the family home without being hit by tax penalties.
From 6 April 2020, the spouse who moves out of the family home will only have a nine-month window in which to sell their interest before CGT applies to the proceeds of the sale, instead of the 18 months that currently applies. CGT will be charged at 28% on the departing party's share in the matrimonial home, assuming the departing party is a higher rate taxpayer.

CGT private residence relief means that anyone selling their main home does not need to pay CGT on the proceeds. The change, which was announced in the 2018 Budget, is to the final period exemption, which covers the final months of ownership of a residential property, regardless of whether the taxpayer is still living there. The final period exemption will be cut from 18 months to nine months in all circumstances, other than the extended 36 month final period exemption available to those with disabilities or those who have moved to a care home.

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