Income Tax and Divorce

Married couples are taxed independently of each other and so divorce should not have any particular impact on an individual’s income tax position. 

However, careful consideration will be required of the income tax consequence of the divorce settlement. 

Most assets received as part of a divorce settlement are not subject to income tax. For instance, if the court orders your spouse to pay you £50,000 as part of the settlement, this amount is not taxable. However, if you receive income-generating assets, such as rental property or dividend-paying shares, these will be subject to income tax once they are in your ownership. The income from these assets will be taxed according to your personal income tax band, and you will likely need to complete a self-assessment tax return to declare this income in the future. 

The tax implications of divorce can be complex and costly. You should carefully plan the division of your assets and seek specialist advice to minimise the tax burden of your separation. If you’re considering or going through a divorce, click below for a free initial consultation with one of our expert divorce solicitors. 

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Tax on spousal or child maintenance payments 

Maintenance payments are generally not subject to the UK tax system. Since 6 April 2000, there has been no tax relief on maintenance payments made to a former spouse or child following separation or divorce, and these payments are not taxable for the recipient. 

The only exception to this is if all the following apply: 

• Either you or your spouse were born before 6 April 1935 

• You’re paying maintenance under a court order after the relationship has ended 

• The payments are for the maintenance of your ex-spouse or former civil partner (provided they are not now remarried or in a new civil partnership) or for your children who are under 21 

In the rare circumstances where all three requirements are met, Maintenance Payments Relief can be claimed for 10% of the maintenance you pay to your ex-spouse or civil partner, up to a maximum of £428 a year (or 10% of £4,280). 

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