When a couple is separating or is divorced it is unlikely that they are thinking about the tax implications of their actions. However, apart from the emotional stress, there are also tax issues that can have significant implications.

The Capital Gains Tax (CGT) rules that apply during separation and divorce changed for disposals that occur on or after 6 April 2023. These changes extended the period for separating spouses and civil partners to make "no gain/no loss transfers" up to three years after they cease living together. The changes also provide for an unlimited time if the assets are the subject of a formal divorce agreement. Prior to this change, the no gain/no loss treatment was only available in relation to disposals in the remainder of the tax year during which the separation occurs.

There are also special rules that apply to individuals who have maintained a financial interest in their former family home following separation and that apply when that home is eventually sold. This allows for private residence relief (PRR) to be claimed when a qualifying property is sold.

It is also important, during divorce proceedings, to make a financial agreement that is acceptable to both parties. If no agreement can be reached, then proceeding to court action to make a 'financial order' will usually be required.

Accordingly, the couple and their advisers should give proper thought to what will happen to the family home, any family businesses as well as the inheritance tax implications of separation and / or divorce.

In general, there is no Capital Gains Tax (CGT) liability created when a property used as the main family residence is sold. An investment property which has never been used as a home will not qualify. This relief from CGT is commonly known as private residence relief.

Taxpayers are entitled to full relief from CGT when all of the following conditions are met:

1. The family home has been the taxpayers only or main residence throughout the period of ownership.
2. The taxpayer has not sublet part of the house – this does not include having a lodger share your house.
3. No part of the family home has been used exclusively for business purposes (using a room as a temporary or occasional office does not count as exclusive business use).
4. The garden or grounds including the buildings on them are not greater than 5,000 square metres (just over an acre) in total.
5. The property was not purchased just to make a gain.

If a property has been occupied at any time as an individual’s private residence, the last nine months of ownership are disregarded for CGT purposes – even if the individual was not living in the property when it was sold. The time period can be extended to thirty-six months under certain limited circumstances. There are also special rules for homeowners that work or live away from home.

Married couples and civil partners can only count one property as their main home at any one time.

A Post Transaction Valuation Check (PTVC) can be requested from HMRC for an individual to work out a capital gains tax liability or for companies to calculate corporation tax liability on chargeable gains. The request for a PTVC should be made using the CG34 form. HMRC’s guidance says the form must be completed and sent to the address on the form at least three months before the relevant tax return filing date.

The PTVC is a service offered by HMRC to check valuations after a disposal has been made, including a deemed disposal following a claim that an asset has become of negligible value but before the completion of a self-assessment return. This service is available to all taxpayers, individuals, trustees and companies.

If HMRC agrees with the valuations set out they will not question the use of those valuations in the return, unless there are any important facts affecting the valuations that have not been disclosed. Agreement to the valuations does not always mean that HMRC agree the gain or loss. When the return is filed, HMRC will consider the other figures used. If an agreement cannot be reached, HMRC will suggest alternatives such as using specialist valuers.