Capital gains tax as part of a divorce

Currently getting divorced and trying to work out if me or my ex (or both) will be hit by capital gains tax (which will doubtless send us back to the negotiating table). We’ve currently got a solicitor drawing up a consent order, but I found out yesterday that the relief from CGT you get for a property being your home is now only 18 months (last time I looked it was 3 years!). Looks like the date that matters is the ‘date of permanent separation’ – we could choose from the following – anyone know which is correct?

Feb 13 – start of trial separation when she moved into a friend’s flat – 25 months ago

Oct 13 – date that she moved her stuff out of the FMH and started renting another place- 17 months ago

July 14 – date she stopped contributing to the mortgage – 8 months ago

Does anyone know what the ‘correct’ date to use is? I assume the tax will be on 50% of the ‘gain’ we’ve seen in the value of the house.

Cheers in advance – this whole process is so awful. 🙁

Personally, I would tell the tax man –

But if you want to be honest, when did she change addresses for her correspondence ?

Alternatively speak to the very expensive lawyer ?

My gut feeling would be that for the purposed of CGT it should be from whenever she stopped having a financial interest in the property, i.e. when she stopped paying (all or part of) the mortgage.

IANAL

Tax man will find out I presume when the land registry etc transfer the property to my name. Addresses were changed around time she started renting.

Going to ask my solicitor when I speak to her but she’s not a tax specialist.

Get proper advice but I think that you are worrying over nothing. Using the worst case of 25 months, the 18 months relief means that the CGT liability will be limited to 7 months. Given that you each have a CGT allowance of around 10k (assuming that this won’t be used for something else), to be liable for CGT would mean that the average monthly increase in the value of your house over the entire period of ownership would need to be more than £2800 per month.

Ah – I thought after 18 months, you got nothing. I.e. you use it or loose it. If it doesn’t then that will significantly change things!

Why are you looking at CGT on your primary residence as it would be exempt from capital gains. The fact your wife has moved out makes no difference to this been your primary residence.

Ah – I thought after 18 months, you got nothing. I.e. you use it or loose it. If it doesn’t then that will significantly change things!

Unless things have changed a lot since I did this calculation the total relief was the sum of the time you lived there plus 36 (now 18) months and the CGT was only payable on the time after that, whereas the total gain was calculated from the time of purchase to the time of sale.

Why are you looking at CGT on your primary residence as it would be exempt from capital gains. The fact your wife has moved out makes no difference to this been your primary residence.

I’ve continued to live there, she hasn’t, so when I buy her out she is liable for whatever CGT is due.

In that case you have the 18 months from separation (when she moved her stuff out)

The following article explains it well. If you solicitor hasn’t pointed this out to you then get one that knows what they are doing before it is too late. Link

@mtb – yes its awful ! Was back in court yesterday.

Ask an accountant, have your solicitor do this officially. If there is a GCT liability it should be included in the settlement calculations so any payment has to be bourne / accounted for by both of you. I don’t know the specific answer as in my case the “move out” was for only 7 months.