For many years, tax planning has quietly played an important role in financial settlements on divorce—particularly for internationally mobile families and those with offshore wealth. However, recent changes mean that what was once relatively predictable is now far less so.
In particular, HMRC guidance issued in 2025 has cast doubt on a commonly used strategy for mitigating UK tax on certain divorce payments. The result is a greater degree of uncertainty for separating couples—and, importantly, a renewed need for careful, joined-up advice at an early stage.
A shifting landscape
Historically, non-domiciled individuals living in the UK could take advantage of the “remittance basis” of taxation. In simple terms, foreign income and gains were only taxed if and when they were brought into the UK.
This created opportunities in a divorce context. With careful structuring—and crucially, timing—it was sometimes possible to meet financial settlement obligations in a tax-efficient way, including by using offshore funds without triggering a UK tax charge. Following the case of HMRC v Sehgal and Megham however, this option is now closed.
From April 2025, that landscape changed significantly. The remittance basis has been abolished and replaced with a residence-based regime, alongside a limited four-year relief for certain individuals on foreign income and gains.
While transitional rules still apply in some cases, the overall position is now more complex—and far less forgiving.
The end of a “useful” workaround?
One practical consequence of these changes is that a strategy often used in the past may no longer be available.
Previously, separating spouses could sometimes structure lump sum payments so that they were made after the final divorce order, meaning the recipient was no longer treated as a “spouse” for tax purposes. In the right circumstances, this could allow offshore funds to be brought into the UK without triggering a tax charge.
Following HMRC’s updated position, that approach is now unlikely to work in the same way—if at all.
That does not mean tax planning has fallen away entirely. But it does mean there is less certainty as to the outcome, and fewer “tried and tested” solutions.
Why this matters in financial settlements
Tax has always been a key (if sometimes underestimated) factor in divorce negotiations. The court is concerned with achieving fairness, but “fairness” is ultimately measured by reference to net, not gross, asset values.
That means understanding the tax consequences of any proposed settlement—whether arising on sale, transfer or future realisation—is critical, so as to understand any income tax, capital gains tax and Stamp Duty Land Tax issues that might arise.
This becomes particularly important where:
- assets are held offshore
- one or both parties have complex tax profiles
- liquidity is an issue and assets may need to be realised
- Where land and property assets are to be transferred
- or timing of payments is being negotiated
In all of these scenarios, the tax position may materially affect the true value of what each party receives.
A greater need for joined-up advice
If there is one clear takeaway, it is that siloed advice is no longer enough.
Family lawyers, tax advisers and, where relevant, offshore specialists need to be working together to ensure that settlements are both legally robust and tax-efficient (or at least tax-aware). The days of treating tax as an afterthought are long gone.
Early advice is also key. Once a settlement structure is agreed—or worse, implemented—it may be too late to revisit the tax consequences.
Proceed with care
For clients, the message is a reassuring but realistic one: while opportunities for tax mitigation have not disappeared, they are now more nuanced and fact-specific.
For advisers, it is a reminder that assumptions based on previous practice may no longer hold true.
In a landscape defined by change, the safest approach is a cautious and informed one—grounded in up-to-date advice and a clear understanding of how tax interacts with the overall settlement.
About the authors
Estella Newbold-Brown is Partner and Head of Family, advising high-net-worth clients on complex financial settlements and children matters.
Estella is a highly regarded family law specialist, advising high-net-worth individuals on complex financial and children-related matters. She acts in cases involving significant wealth, family businesses, international assets, and offshore structures, and is known for her strategic, pragmatic, and empathetic approach. She is recognised for her meticulous organisation, clear communication and forward-thinking style, ensuring clients feel supported throughout every stage of their case.
Kurt Lee is Partner and Head of Private Client, has extensive experience in tax and tax law,
Kurt Lee is a highly regarded expert in inheritance tax (IHT), capital gains tax (CGT), trusts and estate work. Throughout his career, he has successfully advised individuals and families, on complex tax planning, trusts, asset protection and estate administration. He provides a comprehensive range of services, from minimising IHT to structuring estates with tax efficiency in mind. He regularly works with high-net-worth clients, guiding them through the tax implications surrounding the transfer of wealth, be it through wills, trusts, or lifetime gifts.
Estella Newbold-Brown Kurt Lee
