Why you need to hold out before separating this January

Christmas... all that 'quality time' together with your spouse; managing the excitement of the children, in-laws and other relatives visiting (or you being required to trek to them) is bad enough. But add the pressure of New Year, the expectation to be somewhere (and to be someone) fabulous... and  marriages can be put under immense pressure. Relationships that were already straining, can break.

That is why officially on 7 January, Monday this week- the day most of us trudge back to work with the mince pie pounds on our hips the only remnant of our Christmas- has been labelled 'Divorce Day' by UK solicitors .

However, separating this week is not a good idea financially, if there are assets to distribute between you. Although the family home is usually exempt from capital gains tax, there may be other assets that are not.

If there are assets which would be the subject of a financial order in a divorce such as a second home, shares or other such assets, there may end up being a capital gains tax shock of up to 28% on divorce.

This is because in the UK, transfers between spouses are free of capital gains tax, but only while they are living together. Once they are separated, they have the tax year of separation to distribute the assets.  After 5 April of the year of separation, any distribution between the couple will be a chargeable disposal. This disposal will be at market value even if no consideration is given for the asset by the spouse.

So... if you separate on 6 April, you have a full  year to sort out your marital finances. If you separate on 7 January, 'Divorce Day' you have but 12 weeks...

To read more about this, please see my article on divorce published in the UK Tax Adviser magazine.

If you need help with a divorce, Just family Law can assist.

JUST FAMILY LAW

MEG'S DIVORCE ARTICLE