How Is a Property Portfolio Divided in Divorce?
When a couple divorces, their financial assets—including property portfolios—must be fairly divided. The Matrimonial Causes Act 1973 gives courts the power to distribute assets based on factors such as:
- Financial contributions of each spouse.
- Future needs, including housing and income requirements.
- Children’s welfare, if applicable.
- Business interests, if properties are part of an investment portfolio.
Courts aim for a fair division, which does not always mean a 50/50 split, particularly if one party has greater financial needs.
What Happens to Property Investments in a Divorce?
There are several ways a property portfolio can be handled:
1. Selling & Splitting Proceeds
- The easiest option is to sell properties and divide the profits.
- Capital Gains Tax (CGT) may apply if assets are sold after divorce completion.
2. One Spouse Buys Out the Other
- If one party wants to retain the portfolio, they may buy out the other’s share.
- This may require refinancing or restructuring existing loans.
3. Transferring Properties to One Spouse
- Some properties may be transferred to one spouse in a clean break settlement.
- Stamp Duty Land Tax (SDLT) exemptions may apply in certain cases.
4. Keeping Joint Ownership
- Ex-spouses can retain ownership and share rental income.
- This requires a clear legal agreement on future management and profit division.
Tax Considerations When Dividing Property in Divorce
1. Capital Gains Tax (CGT)
- Transfers between spouses are exempt from CGT until the end of the tax year in which they separate.
- Selling after divorce finalisation may trigger CGT liabilities on gains.
2. Stamp Duty Land Tax (SDLT)
- No SDLT is due on property transfers as part of a divorce settlement.
- However, SDLT may apply if one spouse pays the other in cash for their share.
3. Inheritance Tax (IHT) Considerations
- If one spouse dies after retaining ownership of properties, the estate value may impact IHT planning.
How to Protect Your Property Portfolio in Divorce
If you own a property portfolio, planning ahead can help safeguard your assets:
- Pre-nuptial or post-nuptial agreements – Clearly define asset division before marriage or after acquiring properties.
- Company structures – Holding properties in a limited company may provide protection.
- Legal & tax planning – Seek professional advice to structure a fair and tax-efficient settlement.
How Fraser Bond Can Help
Fraser Bond provides expert advice on property division, valuations, and investment restructuring during divorce. Whether you’re looking to sell, refinance, or transfer assets, our team ensures a strategic approach to protect your financial interests.
Need Property Advice During Divorce? Contact Fraser Bond Today
Navigating a divorce with a property portfolio? Speak to Fraser Bond’s experts for tailored solutions to protect your investments and secure your financial future.
