Changes to Capital Gains Tax Legislation and Lifetime Allowance Provisions

• Spouses/civil partners will be given three years to make no gain/no loss transfers of assets between themselves when they cease living together (provided the court has not already made the pronouncement of Decree Absolute/Final Order).
• If the assets are already subject to a formal divorce agreement, there is no time limit to make no gain/no loss transfers between spouses/civil partners.
• Private Residence Relief will be available to claim on the sale of the former matrimonial home for those spouses/civil partners who retained an interest in the property as part of the settlement.

The rules apply to all capital assets, including properties, shares and land. As with the previous rules, the CGT charge does not disappear, and the receiving spouse will be responsible for paying the CGT on future sales or transfers of the asset.

At the Spring 2023 Budget, the Chancellor announced that the LTA will be abolished. The LTA will remain in place for 2023/24, but the tax charge that arises when it is exceeded will be disapplied.

Effectively, this means that from 6 April 2023, any benefits 'crystallised' in excess of the LTA (£1.073m) will be subject to income tax at the recipient's marginal rates.

The treatment will affect the following:

• Serious ill-health lump sums and lifetime allowance excess lump sums payable before the member reaches 75; and
• Defined benefits lump-sum death benefit and uncrystallised funds lump-sum death benefit where the member concerning the receipt died before reaching age 75.

The rules were introduced to ensure people stay in work for longer or encourage those to return to employment, if possible, to stimulate economic growth.

Lifetime Allowance (LTA) is the maximum amount of tax-relieved pension savings an individual can make over their lifetime.

The limit is currently set at £1,073.000. Individuals may contribute to their pension over these limits but will be subject to a tax charge on the amount above the allowance.

The tax charge will either be 55% as a lump sum or 25% as a pension.