Other taxes Income tax is not charged on the transfers under a divorce settlement. If however an income generating asset is allocated as part of the settlement, the transferee will be subject to income tax on any income from the date of transfer. Transfer of assets remain exempt from inheritance tax (IHT) until the date of Decree Absolute (although the exemption is limited to £325,000 if the transfer is to a non-domiciled spouse). Transfers after Decree Absolute are potentially exempt transfers (PET) and will be exempt from IHT if the donor survives seven years. Property transferred between spouses under a court order is not subject to Stamp Duty Land Tax, even if the transferee takes on a mortgage. A divorce is often complex. It will be important to review all matrimonial assets and seek advice with regards to planning to ensure settlements are structured in the most efficient way and that no one is unintentionally left with an unwelcome tax charge. It is often a requirement of a Court Order that an independent Expert Witness Report is obtained to document the CGT implications of any divorce settlement and our Tax team have assisted a number of divorcing parties with Expert Witness Reports.
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