Tax changes announced in Budgets or during the parliamentary year can materially alter the practical and financial outcome of divorce settlements and ongoing spousal maintenance. Family lawyers, financial advisers and courts take the tax position of both parties into account when negotiating or approving settlements — and even small tax changes can shift the balance of what is fair and practicable.

Below we look at the main taxes to watch, the typical way they interact with divorce settlements and maintenance, how small vs large changes might matter, and practical steps and evidence that a parent can use to show they (or their ex) have been advantaged or disadvantaged by a tax change.

Which taxes matter and why

  • Income Tax (and National Insurance): Income tax is central to maintenance and to calculating available income to pay maintenance. Spousal maintenance (periodical payments) itself is not taxable in the hands of the recipient, and the payer cannot usually claim a deduction for this. That means changes to marginal income-tax rates, personal allowance thresholds, or NICs affect a payer’s net income and a recipient’s means indirectly (because their own earned income might change).
  • Capital Gains Tax (CGT): Dividing capital assets such as shares, investment portfolios, or second homes can trigger CGT. Normally, transfers between spouses/civil partners are on a “no gain/no loss” basis while married and living together; when separation occurs, or if one party later sells an asset that was received in the settlement, the CGT outcome can change. Changes to CGT rates or to annual exempt amounts can therefore increase or reduce the post-settlement tax bill and so the effective value of lump-sum settlements or property transfers.
  • Stamp Duty Land Tax (SDLT): If one spouse keeps the family home and buys out the other, the chargeable consideration (including a transferred mortgage) can create SDLT liability for the purchaser unless an exemption applies. Transfers under a court order can be exempt in many cases, but changes to thresholds or rules (or the eligibility of exemptions) can mean a previously agreed transfer becomes more expensive — or cheaper — because of tax. This matters especially when the settlement uses property values to balance capital and needs.
  • Pension tax rules: Pension sharing orders are tax-efficient ways to split pension wealth. Where the court makes a pension sharing order, the transfer is normally carried out without immediate tax charges; future taxation depends on how pensions are drawn down. But wider changes to pension tax rules (e.g., the pension lifetime allowance, tax-free cash rules, or how pensions are taxed on withdrawal) change the real value of a pension share and may affect whether a settlement that used pension sharing was equitable.
  • Business taxes (corporation tax, dividends, capital allowances): If one spouse owns a business, corporation tax rates, dividend taxation, or changes to reliefs can materially affect the business’s distributable profit and thus the owner’s ability to pay maintenance or the capital value of the business in a clean-break settlement. Revisions to R&D reliefs, capital allowance rules, or anti-avoidance measures (e.g., business asset disposal relief) can also alter valuations. Because business taxation is complex, small percentage changes can sometimes significantly affect valuation.
  • Inheritance Tax (IHT): IHT typically plays into longer-term planning and can be relevant when settlements anticipate future inheritances or when settlement structure uses trusts or lifetime gifts. Changes to nil-rate bands can affect the attractiveness of capital settlements vs ongoing maintenance.

Proving that an ex has benefitted from a tax change

When one parent claims the other has benefited from tax law changes (for example: received tax-free treatment, windfall from an asset sale, or material reduction in tax burden), proving this without voluntary cooperation can be challenging but not impossible.

In financial remedy proceedings, both parties must provide full and frank disclosure using Form E and supporting documents (payslips, P60, SA tax computations, bank statements, pension valuations, share certificates, business accounts). If a party refuses to disclose, the court can draw adverse inferences and order disclosure.

If necessary, a party can ask the court to order that documents be obtained from third parties such as banks, accountants, or even HMRC. HMRC will comply with court orders, but they will not provide records voluntarily to litigants. There is an established process for court orders addressed to HMRC to obtain specific tax records.

Where disclosure is evasive, a party can instruct forensic accountants to trace funds (e.g., sale proceeds routed through companies or foreign accounts) and produce expert evidence to the court. This is common where business owners try to disguise profit distributions that reduce declared income. Expert reports are costly but persuasive.

Companies House accounts, Land Registry titles, and share registers are public and can provide evidence of property transfers, share disposals, mortgage information and sometimes timing that correlate with tax events. These open-source items are often the starting point.

Bank statements, lifestyle evidence (expensive purchases, foreign travel), and timing of asset disposals can bolster an inference that a favourable tax event occurred (e.g., a sale at a time when CGT rates were lower).

Tax law changes,  whether these are modest tweaks or sweeping reforms, can materially affect both the bargaining position at the time of settlement and the actual after-tax value of maintenance or capital awards. The most exposed areas are income tax (affecting payers’ ability to pay maintenance), CGT (affecting the proceeds available from asset disposals), SDLT on property transfers, pensions rules, and business taxation. Where a party suspects that their ex has benefited from a tax change, or that they have been disadvantaged, the family court has tools in the form of Form E, targeted third-party and HMRC orders that it can call upon, In addition, there is the requirement to provide documentary and expert proof — but these tools must be used carefully and proportionately. It is good practice for solicitors to anticipate any likely tax risk in financial settlements and to preserve documentary evidence so that any later claim to vary or challenge a settlement has a firm foundation.