Personal tax following a divorce
Q: After 35 years of marriage, one of my clients is now finalising her divorce. As part of their financial settlement, the courts will be making an order for her ex-husband in respect of her pension rights. How will this impact on her from a tax point of view?
A: Sharing of pension rights can be done in one of two ways: by use of an attachment order (under the Pensions Act 1995) OR by a pension sharing order (under the Welfare Reform and Pensions Act 1999).
With an attachment order, no rights of ownership are transferred to the ex-husband. This means that she will remain taxable on the whole amount and any amounts received by her ex-husband will be paid to him free of tax.