Marriage separation

Here, we have a brief look at how separation affects your special tax allowances (such as married couple's allowance) and maintenance. We also look at how separation affects capital gains and inheritance tax.

For income tax purposes a married woman is treated as living with her husband (this also applies to civil partners) unless they are separated:

• under an order of a Court, or
• by a formal deed of separation executed under seal (except in Scotland, where the deed should be witnessed), or
• in such circumstances that the separation is likely to be permanent.
  

Topics covered include:

Married couple's allowance

Maintenance payments

Capital gains tax (CGT)

Inheritance tax (IHT)

Married couple's allowance (MCA)

• You can get the allowance in full in the year that you separate. To look at how MCA works use the link.
• If you and your spouse (or civil partner) are later reconciled the allowance is available for the tax year of reconciliation. If this is also the year that you separated, the allowance is given without any break.

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Maintenance payments

• If, following separation, one spouse or civil partner makes maintenance payments to the other, under a Court Order or formal agreement, the payer will be entitled to a deduction from their tax bill if either spouse or civil partner was born before 6 April 1935.
• The amount taken off will be the lower of £296 or 10% of the payments made.
• The relief is available in full in the year of separation as well as married couple's allowance.
• HMRC will include the relief in the payer’s tax coding or it can be claimed on their tax return.
• The relief does not apply where the maintenance is paid to or for the benefit of a child.

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Capital gains tax (CGT)

• If you separate and your spouse (or civil partner) moves out of the family home, it will cease to be the main residence of the spouse (or civil partner) who moves out.
• This means that if the property is later sold, that spouse or civil partner will be liable to CGT for the period when they did not live in the family home.
• However the last three years of ownership of a property are always counted as years in which you lived in the house and so if the marital home is sold within three years from the date of leaving, there will be no CGT.
• If the house is sold after three years there will be a gain but it will be based only on the excess period over the three years. This is then compared to the total ownership period since 31 March 1982 (or the date the property was purchased if later) and that proportion of the gain is chargeable to CGT.
• There will still be an annual exemption to set against the gain and there may be some capital losses available to set off as well.
• HMRC do have a special concession (ESC D6) that applies in some cases. This covers situations where the leaving spouse (or civil partner) does spend more than three years away from the marital home, but the property is being transferred to the former spouse (or civil partner) as part of a financial settlement, and the spouse (or civil partner) who left has not elected for any other property to become his or her main residence. If you think this applies to you, please contact HMRC for more advice.
• For assets other than the family home, the CGT exemption for disposals between husband and wife (or within a civil partnership) only applies for tax years when they are living together. For years following the year of separation, the exemption no longer applies.

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Inheritance tax (IHT)

• When you separate there are no IHT consequences; but once you divorce, the tax-free exemption for gifts between husband and wife (and civil partners) no longer operates.
• There is however an exemption for any gifts made by either partner for the maintenance of the former husband or wife, former civil partner or any children of the marriage.

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