Divorce and Tax

LennyB

I have been informally separated from my husband for over 5 years. We have been talking about future finances and getting divorced. At the moment we are thinking that I can have the house which is fully owned and he will keep his pensions.  I am happy with that suggestion however would like to understand if I will be liable to pay any tax such capital gains tax once the house is transferred as part of a divorce settlement.  I will take legal advice but if anyone has any information on this I would be grateful.  Thanks 

AskAsk

i have just quickly glanced at the link below, and it would appear that you won't be subject to capital gains tax.

https://www.gov.uk/money-property-when-relationship-ends/tax#:~:text=when transferring assets-,Tax when transferring assets,the divorce or civil partnership.&text=You usually do not have,or sell your main home.

LennyB

Thanks. It does seem to be saying that although slightly confused about the second section that talks about transferring assets when you are separated. 

AskAsk

LennyB said:

Thanks. It does seem to be saying that although slightly confused about the second section that talks about transferring assets when you are separated. 

i found this link, which seems to explain in layman terms, although it still sounds a bit hard work reading through that!

https://www.wellersaccountants.co.uk/blog/in-the-divorce-process-capital-gains-tax-issues

TBagpuss

You won't have tp pay CGT . However, if you have been living in the house and he has been living elsewhere, it's possible that he may have a CGT liability when he transfers his interest in the house to you, as he won't be able to claim the exemption for transfers between spouses, due to the length of time you've been separated.

The total gain in value is apportioned over the length of time you've owned the property, and if you own jointly then you treat  as being half each,  (so if you have owned the property for 20 years and it increased in value by £100,000 in that time, you would apportion it as having gained £416 a month, his share of the that would be £208 per month)) 

You discount the time he was living there and the last 18 months before it is transferred, so in my example, if you owned if for 20 years and he left 5 years ago, then the disregard would be the 15 years  (180 months) you lived there together, plus 18 months, so a total of 198 months,  so the period to be taken into account would be the remaining 42 months.

You would then work out the gain attributable to those months , which in this example would be 42 x £208, to give a total taxable gain of £8,750. 

He has an annual exemption which from memory is £12,500, so in my example (assuming he has no other chargeable gains in the relevant tax year) he wouldn't pay any CGT as the total amount is well below the annual allowance. 

if the gain is over the annual allowance then the amount of tax payable is based on his income, as well as theamount of the gain.