Capital gains in divorce settlement?
Discussion
My new partner is still in the throes of her financial agreement to finalise her divorce.
In simple terms
They are splitting assets and property 50/50
He is keeping his new house plus two rentals.
She is keeping the family home plus 1 rental
She has been told
If she sells the family home after the divorce she may be liable to pay capital gains.
Why is this?
How do you calculate how much it would be, HMRC looks a minefield.
She works part time in retail so not a 40% tax payer.
Can anyone help her understand the consequences?
In simple terms
They are splitting assets and property 50/50
He is keeping his new house plus two rentals.
She is keeping the family home plus 1 rental
She has been told
If she sells the family home after the divorce she may be liable to pay capital gains.
Why is this?
How do you calculate how much it would be, HMRC looks a minefield.
She works part time in retail so not a 40% tax payer.
Can anyone help her understand the consequences?
You don't pay CGT on your main residence so if she lives in the family home I don't see why it would be a problem.
Any other property would be liable to it.
However, if she now lives elsewhere, i.e. with you then she would pay CGT on the main residence when it was sold
As I understand it:
The amount (or percentage of the gain) which would be liable to CGT would depend on when it was sold. The gain in value is assumed to have taken place evenly over the time you own it. The time she lived in it is CGT free and then you get given an extra 9 months.
So if she owns it for a total of 10 years & lived in it for say 5 years and 3 months then (after adding the 9 months); 6 years or 60% of the gain would be CGT free
So she would pay CGT at whatever her rate was on the remaining 40% of the gain (not the sale price, the gain).
Obviously she can get round it by making it her main residence again before its sold. An accountant would be able to advise how long she would need to live there to make that happen.
Any other property would be liable to it.
However, if she now lives elsewhere, i.e. with you then she would pay CGT on the main residence when it was sold
As I understand it:
The amount (or percentage of the gain) which would be liable to CGT would depend on when it was sold. The gain in value is assumed to have taken place evenly over the time you own it. The time she lived in it is CGT free and then you get given an extra 9 months.
So if she owns it for a total of 10 years & lived in it for say 5 years and 3 months then (after adding the 9 months); 6 years or 60% of the gain would be CGT free
So she would pay CGT at whatever her rate was on the remaining 40% of the gain (not the sale price, the gain).
Obviously she can get round it by making it her main residence again before its sold. An accountant would be able to advise how long she would need to live there to make that happen.
Edited by Wombat3 on Saturday 29th May 15:21
Don't know if you still get CGT relief for any time that the property is rented out.
You did a few years ago when I sold a previous primary residence to my then tenant.
Arranged the sale so that I had zero CGT liability due to the combination of years as primary residence, plus years rented, plus 18 months freebie (as it was then).
You did a few years ago when I sold a previous primary residence to my then tenant.
Arranged the sale so that I had zero CGT liability due to the combination of years as primary residence, plus years rented, plus 18 months freebie (as it was then).
Thanks both. We don’t live together and yes she is still in their family home which she plans to keep for several years yet.
She has lived in it continuously for the last 8 years since they bought it.
On HMRC it said something like it could be liable for CGT as they both still own it but he hasn’t lived in it this tax year?
She has lived in it continuously for the last 8 years since they bought it.
On HMRC it said something like it could be liable for CGT as they both still own it but he hasn’t lived in it this tax year?
Have a word with a good tax expert.
We bought our house from my FiL who had had it empty or let to family for about 6 years.
It was his old family home and he had built new elsewhere, there was a lot of toing-and-froing and an almighty argument because he used to run his business from the premises but he still got away with no CGT.
If he got away with that, inclusive of the business complications, then I can see no issue for you providing you approach it in the right way.
We bought our house from my FiL who had had it empty or let to family for about 6 years.
It was his old family home and he had built new elsewhere, there was a lot of toing-and-froing and an almighty argument because he used to run his business from the premises but he still got away with no CGT.
If he got away with that, inclusive of the business complications, then I can see no issue for you providing you approach it in the right way.
Stick Legs said:
Have a word with a good tax expert.
We bought our house from my FiL who had had it empty or let to family for about 6 years.
It was his old family home and he had built new elsewhere, there was a lot of toing-and-froing and an almighty argument because he used to run his business from the premises but he still got away with no CGT.
If he got away with that, inclusive of the business complications, then I can see no issue for you providing you approach it in the right way.
I can’t see it either but it’s this page that has concerned her. We bought our house from my FiL who had had it empty or let to family for about 6 years.
It was his old family home and he had built new elsewhere, there was a lot of toing-and-froing and an almighty argument because he used to run his business from the premises but he still got away with no CGT.
If he got away with that, inclusive of the business complications, then I can see no issue for you providing you approach it in the right way.
https://www.gov.uk/money-property-when-relationshi...
rfisher said:
Don't know if you still get CGT relief for any time that the property is rented out.
You did a few years ago when I sold a previous primary residence to my then tenant.
You still do, but the landlord has to be living in the property at the date of sale - which for most people is not practical or possible.You did a few years ago when I sold a previous primary residence to my then tenant.
Gassing Station | Finance | Top of Page | What's New | My Stuff