You will have probably heard in the news about the changes to divorce law that have come into force. Under the new ‘no-fault’ rules, couples will no longer need to blame one of themselves for the breakdown of their marriage.

Previously, one spouse had to make accusations about the other’s conduct or face years of separation before a divorce could be granted. This was regardless of whether a couple had mutually decided to separate.

The Divorce, Dissolution and Separation Act (2020) – which came into effect on 6 April 2022 – aims to help couples focus on key practical decisions involving children or their finances.

No-fault divorce

The reforms mean a spouse, or a couple jointly, can now apply for divorce by stating their marriage has broken down irretrievably. It removes unnecessary finger-pointing and hostility at a time when emotions are already running high.

The changes stop one partner from maliciously challenging a divorce and trapping their spouse in an unhappy marriage. In some cases, domestic abusers can use their ability to dispute the process to further harm their victims or to lock them in the relationship.

End of the ‘blame game’?

Deputy Prime Minister, Lord Chancellor and Secretary of State for Justice, Dominic Raab, said: “The breakdown of a marriage can be agonising for all involved, especially children. We want to reduce the acrimony couples endure and end the anguish that children suffer.

“That’s why we are allowing couples to apply for divorce without having to prove fault, ending the blame game, where a marriage has broken down irretrievably, and enabling couples to move on with their lives without the bitter wrangling of an adversarial divorce process.”

What else is included in the reforms?

The act introduces a new minimum timeframe of 20 weeks between the start of proceedings and when people may apply for a conditional order of divorce. The aim is to give couples time to reflect and potentially turn back, or, if reconciliation isn’t possible, to agree important arrangements for the future.

The measures have also seen the language of divorce simplified to make it clearer. For example, ‘decree nisi’ is now ‘conditional order’, ‘decree absolute’ has been changed to ‘final order’, and ‘petitioner’ is now ‘applicant’.

Plus, the Government has committed to look further into the law around financial settlements after a divorce, such as asset division and maintenance payments.

Tax and divorce

Nothing in tax is simple and divorce is no exception, as the rules can be confusing and complex. In fact, divorce was one of the areas the Office of Tax Simplification (OTS) highlighted as needing change.

So, will the new no-fault divorce and the trend towards making divorce more straightforward in law lead to changes in the tax system?

They will be long overdue if they do.

Asset transfer and capital gains tax

Divorce will often result in assets being transferred between each spouse. And while interspousal transfers are exempt from capital gains tax (CGT) during marriage, the rules change on separation.

A married couple only has until the end of the tax year of separation to make any transfers and still apply the exemption. For example, if a couple separate on 1 February, they only have until 5 April that year to make all necessary transfers without triggering CGT. It’s therefore no surprise this can sometimes result in unexpected CGT charges.

And remember, you and your spouse or civil partner are treated as living together unless you’re separated: under a court order; by a formal deed of separation; or in such circumstances the separation is likely to be permanent. In each case the marriage or civil partnership must have broken down.

Specialist tax advice for divorcing couples

Our team of professional tax advisers can help you understand the tax implications of transferring assets in a divorce and can make sure you claim for relevant reliefs.

We can also act as a ‘single joint expert’ (SJE) for court proceedings to calculate the amount of tax due when deciding on the split of your assets.

And where property is involved, there may also be Stamp Duty Land Tax (SDLT) to consider.

To find out more or book our services, get in touch with our team today on 07813 434195 or email stephanie.churchill@churchilltaxation.co.uk

Steph Churchill

Stephanie Churchill

Managing director & co-owner of Churchill Taxation