The treatment of pensions on divorce can be a complex area to navigate. This is exacerbated if either or both of the parties to a divorce has associated potential or actual tax charges.
In addition to welcome changes to capital gains tax for divorcing couples, the Spring budget 2023 also introduced a number of changes to pensions legislation that will be welcomed particularly by high earners. They include:
The low level of the annual allowance has been a particular concern for many high earners, such as NHS consultants, given the way in which the value of their pension is calculated. There have been reports of individuals who have received a pay increment or a promotion, or indeed have taken on additional work to alleviate service pressure, only then to receive tax bills for many thousands of pounds for exceeding the annual allowance. The changes announced in the Spring budget may go some way to mitigate those concerns.
It is crucial for divorcing parties to understand the nature and value of all their pension benefits, as well as any risk of associated tax charges, in order then to assess how the pensions should be fairly treated on divorce.
For more information, please contact a member of Raworths Family team
Published on 11 April 2023