Capital Gain Tax question

adamjth

Situation:-

I am getting divorced and as part of the settlement I am going to cash out 40K of my shares accrued through work to pay off a third of the mortgage on my family home in UK. This is so my wife can continue to live there with kids whilst they grow up and when they are we will split the house 50/50. In the meantime I can afford to find someplace to live

Question:-

I believe I don't have to fill out a capital gains form for this as its below 45k . Also these shares have not risen by £11,300 in value in the past year. Is this true and can someone point me at a definitive article? I saw this but its last year:-

https://www.which.co.uk/news/2018/01/ask-an-expert-how-do-i-work-out-my-capital-gains-tax-on-shares/

00ec25

it is not a question of how much much they have risen in a single year. The gain on the shares is the difference between what they cost in the first place and what they sell for
- did you buy them?
- or are they through a work related share scheme?
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg56300c

which one it is will affect what the "cost" price is
if you bought packets of them over time then there are particular rules on how you work out the total gain

the gain is then subject to the deduction of a single lot of CGT allowance (£12,000 for 19/20)

a) if you are already required to compete a tax return then you must declare them on that return
b) if not, you still must declare them if you have tax to pay (ie gain > allowance)

if neither a) or b) apply, then you are correct that as the gross proceeds (what they sell for) is <4 x annual allowance (£48,000) you would not be required to report the sale in that case

that is the easy bit. Next you need to look hard at your financial position... it would be a mistake not to get a "financial settlement" with the ex, particularly as you have to wait for the house. You need a "mesher order" from a court, otherwise you will be hit for more CGT when the house sells in X years time

https://www.gov.uk/capital-gains-tax

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg50200c

adamjth

Thanks for your informed reply - I will read through those details latter. Yes its a work scheme where shares vest as they go along. Regarding the Mesher order I have decided that I am very likely to rent instead for the next 8 years. As I am 50 there is only so much mortgage I want and yes thanks for the tip about CGT as I will also be liable for a higher stamp duty.

adam

00ec25 wrote: »

it is not a question of how much much they have risen in a single year. The gain on the shares is the difference between what they cost in the first place and what they sell for
- did you buy them?
- or are they through a work related share scheme?
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg56300c

which one it is will affect what the "cost" price is
if you bought packets of them over time then there are particular rules on how you work out the total gain

the gain is then subject to the deduction of a single lot of CGT allowance (£12,000 for 19/20)

a) if you are already required to compete a tax return then you must declare them on that return
b) if not, you still must declare them if you have tax to pay (ie gain > allowance)

if neither a) or b) apply, then you are correct that as the gross proceeds (what they sell for) is <4 x annual allowance (£48,000) you would not be required to report the sale in that case

that is the easy bit. Next you need to look hard at your financial position... it would be a mistake not to get a "financial settlement" with the ex, particularly as you have to wait for the house. You need a "mesher order" from a court, otherwise you will be hit for more CGT when the house sells in X years time

https://www.gov.uk/capital-gains-tax

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg50200c

00ec25

adamjth wrote: »

Regarding the Mesher order I have decided that I am very likely to rent instead for the next 8 years. As I am 50 there is only so much mortgage I want and yes thanks for the tip about CGT as I will also be liable for a higher stamp duty.

I am unsure from your response if you really understand your position?

you have moved out of the martial home and are divorcing
you will retain a financial interest in 50% of the value of the property

you intend to rent a place to live. That will be classed as your main home unless you take positive action to ensure your claim to private residence relief remains intact. You do not have to own a property in order for it to be the main residence for CGt purposes, your rental will be a home by virtue of a "matter of facts" unless you register the ex marital home under a nomination.

I advise you to talk to an accountant or a divorce solicitor versed in taxation issues for a divorcee because there are ways to ensure you won't pay CGT on final sale
https://www.shipleys.com/resources/current-issues/taxation-and-divorce
I appreciate you may be having an amicable financial split with the ex, rather than fighting over every penny, but it would be a shame if years after the divorce you still get bitten financially when a bit of planning now would avoid it

and also avoid the higher rate SDLT provided you get your financial settlement ducks in a row now whilst going through the divorce:
https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09797

adamjth

Once again.... Thank you very much for this information. At the end of the day me ex-wife is on a low salary & cant get a mortgage. Also forcing her to move and disrupt my kids is what I want to avoid as they are blameless in all this. That said I have started a conversation with an accountant and will re-engage my solicitor to identify other possible solutions.