Not married, separation, house CGT confusion

Foxsake1884

The situation is:
- Separating as a couple
- Not married, 2 children (1 biological, 1 without parental responsibility)
- House owned since 2013 (60/40 ownership in my favour). No other properties owned by either of us.
- Equity around £600k

We have agreed that the house will be sold but my ex would prefer it (for the sake of the children...) if I move out and rent whilst the we go through the process. She would cover the cost of the mortgage/billls on the house and I would pay the rental cost/bills (both would be about the same amount of money. In the interests of my own sanity and supporting the transition for the kids then I am open to this idea. My solicitor says that if she goes back on this then she could force the sale if needs be so I should be covered.

If the house isn't sold within 9 months would I be liable for capital gains tax or can I nominate it as my main residence despite renting somewhere else?

AskAsk

as far as i am aware, you can no longer nominate a main residence.  it will be the one you live in.

you have up to 3 years to sell your existing house to avoid the capital gains tax.

you can call HMRC and ask them to confirm the above.  i think it is correct, but best check with HMRC themselves as there may be different treatments if you are getting divorced.

Comms69

Basically the CGT element is negligible anyway. Best bet is to formalise child maintenance, contact etc. And market the house competitively. 

Foxsake1884

Tried calling HMRC, the person I spoke to didn't really seem to know which was reassuring. Agree on formalising the arrangements prior to moving out but it would help to understand what I might be getting into 

AskAsk

Foxsake1884 said:

Tried calling HMRC, the person I spoke to didn't really seem to know which was reassuring. Agree on formalising the arrangements prior to moving out but it would help to understand what I might be getting into 

you should ask that someone who knows the answer come back to you.  did you call self assessment?  they are the people to call and say that you may have to declare CGT so you would like to know.

here is some info i found
https://www.taxinsider.co.uk/home-sweet-home-what-exactly-is-a-main-residence

"If a property has been your OMR at any time during your ownership, then it is deemed to be your OMR for the last three years of your ownership of it, even if you had another OMR at that time."

[Deleted User]

AskAsk said:

as far as i am aware, you can no longer nominate a main residence.  it will be the one you live in.

you have up to 3 years to sell your existing house to avoid the capital gains tax.

you can call HMRC and ask them to confirm the above.  i think it is correct, but best check with HMRC themselves as there may be different treatments if you are getting divorced.

I think you’re confusing CGT with the window in which to claim back the higher rate of SDLT when replacing main residencies as there isn’t a 3 year window to avoid CGT for these circumstances. 

[Deleted User]

Foxsake1884 said:

The situation is:
- Separating as a couple
- Not married, 2 children (1 biological, 1 without parental responsibility)
- House owned since 2013 (60/40 ownership in my favour). No other properties owned by either of us.
- Equity around £600k

We have agreed that the house will be sold but my ex would prefer it (for the sake of the children...) if I move out and rent whilst the we go through the process. She would cover the cost of the mortgage/billls on the house and I would pay the rental cost/bills (both would be about the same amount of money. In the interests of my own sanity and supporting the transition for the kids then I am open to this idea. My solicitor says that if she goes back on this then she could force the sale if needs be so I should be covered.

If the house isn't sold within 9 months would I be liable for capital gains tax or can I nominate it as my main residence despite renting somewhere else?

Your main residence is where you mainly reside which would be the rental property. If the property takes a bit longer than 9 months to sell then I highly doubt CGT will be an issue. You get relief for the time it was your main residence plus an additional 9 months. You also get an annual CGT allowance of £12,300 for this tax year so the sale would really need to drag and house prices would need to shoot up rapidly before CGT because an issue for you. 

AskAsk

Lover_of_Lycra said:

AskAsk said:

as far as i am aware, you can no longer nominate a main residence.  it will be the one you live in.

you have up to 3 years to sell your existing house to avoid the capital gains tax.

you can call HMRC and ask them to confirm the above.  i think it is correct, but best check with HMRC themselves as there may be different treatments if you are getting divorced.

I think you’re confusing CGT with the window in which to claim back the higher rate of SDLT when replacing main residencies as there isn’t a 3 year window to avoid CGT for these circumstances. 

no, the aritcle linked states OMR for CGT.  the OP's ownership in the last 3 years before selling the house would be considered his OMR even if he doesn't live there.  so as long as the family home is sold within 3 years of him going into rented accomodation, he would not be subject to CGT as his family home would still be considered his OMR.

Kynthia

AskAsk said:

Lover_of_Lycra said:

AskAsk said:

as far as i am aware, you can no longer nominate a main residence.  it will be the one you live in.

you have up to 3 years to sell your existing house to avoid the capital gains tax.

you can call HMRC and ask them to confirm the above.  i think it is correct, but best check with HMRC themselves as there may be different treatments if you are getting divorced.

I think you’re confusing CGT with the window in which to claim back the higher rate of SDLT when replacing main residencies as there isn’t a 3 year window to avoid CGT for these circumstances. 

no, the aritcle linked states OMR for CGT.  the OP's ownership in the last 3 years before selling the house would be considered his OMR even if he doesn't live there.  so as long as the family home is sold within 3 years of him going into rented accomodation, he would not be subject to CGT as his family home would still be considered his OMR.

The final period of exemption for Private residence relief has been shortened twice since it was 3 years. It's now just the last 9 months of ownership unless disabled or in care.

AskAsk

here is a specific article for people divorcing, applying from April 2020, so should be up to date.  that gives the 9 months window, which is pretty short and doesn't seem very fair when divorce can take years??

OP - even if you are subject to CGT, it may be zero or small as you have the annual capital gains allowance to offset against any gains and you can pro rate the gain as CGT is only payable on the number of years that you don't live there.

https://www.pinsentmasons.com/out-law/analysis/divorcing-couples-beware-the-capital-gains-tax-trap

Accountant_Kerry

How much capital gains are you really have going to made??  you will get private residence relief for all the time you lived there so if you move out now will it really make any difference?? I doubt it as the market hasnt moved a lot.

example house bought in 2013 for 100,000, now sold in 2022 at 200,000 so 100,000 gain over 10 years = £10,000 a year. you lived there for 8 years so have 8 years PRR and 9 months you get extra PRR for so a total relief of 87,500. capital gains tax aloowance of 12000 (roughly i didnt check) so you have £500 you need to pay tax on.. if you havent put an extension on etc as that gets you more relief