Splitting Up, Dividing Property, CGT?

DeeDeeinDooDoo

I have split from my long term partner, we have a 20+ year old son together AND properties.

Joint home together. Two buy to lets.

Property 1: value £90k, mge £47k, rental income 500pcm, mortgage £98pcm, joint names.


Property 2: Only in ex's name but essentially owned by both of us as I paid the deposit at the time but I think it was back in the day when I had another flat and so we didn't put me down on the mge application. value £135k, outstanding mge £32k, rent 500pcm, mge £230pcm.


Family home: value 240K, 80K equity.


We are in the process of remortgaging property 1, just in my name and ex will probably keep property 2 and we may sell family home.


So ex's equity in property 1 will be transferred to me. Will he have to pay CGT on the invisible gain as I am not giving him any cash for his half? Is it treated as if we sold it and split the profit and he would get approx. £20k except he will not get that cash as it is just a paper exercise.


Then if I perhaps sell in a few years I will need to pay CGT on the £40k gain?

I am quite confused as to what is the best thing to do. We are on very good terms and would hold onto the properties in both names if that would make more sense as we then have 2 CGT allowances. We did BTL as a pension and don't have any other serious savings, perhaps £20k ish.

Sorry it is long. I think I underestimated the financial devastation of splitting up!

Pennywise

A lot of issues there, I'd strongly suggest you engage an accountant to give some proper tax planning advice.

For a start, it's not the "equity" on which CGT is payable, it's the profit, i.e. difference between original buying costs and the current value - the mortgage is irrelevant. That will probably change your figures for the "gain".

Unfortunately, whilst there are tax exemptions for transfers between married couples and civil partnerships, there are no such exemptions for merely living together, so unless you were in a civil partnership, yes, there will be CGT on gains based on current values. There may also be stamp duty too!

DeeDeeinDooDoo

Hi Pennywise,

Thank you. Yes, Stamp Duty too possibly aaargh!

The would be profit is about the same as the equity; 92-55=37. Will go away and look up stamp duty.

An accountant friend has advised me/us to hold onto the properties and not sell because they are good investments. I will approach her with regards to becoming proper clients and getting some thorough advice or ask if she can recommend someone.

Thanks again.