Hi. I divorced 4 years ago, and as part of the divorce settlement I gave over the deeds of the marital home to my spouse, who also took on the mortgage in their name (it was a joint mortgage before then). I retained a charge on the property, of between 12.5-20% of the proceeds (after mortgage paid etc, depending on how calculated) when the property is sold, probably in 2-3 years. I have been renting since then, but am about to buy a house once more. Will my becoming a home owner again have any tax implications for me, when the previous place is sold and I finally realise some money from it? Will the sum I get from the previous place be affected by my new home owning status? I am concerned about this and need to know if it would be in my interest to continue to rent until the house is sold. I hope not, as I am about to exchange contracts on the new place. I should add that my home was my main private residence until January 2008, and that the sum I am likely to receive will not represent a profit versus the 50% share of the sum we paid for it originally back in 1997.
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Hi - thanks very much for this, it's very helpful.
There's a quite a lot hanging on this so I just want to double check that I am understanding how this will play out for me if I now buy a house. So before concluding, could you just confirm for me that I have this correct - as follows:
1. I signed over ownership of my share in my previous property to my spouse in 2008, and was removed from title deeds and mortgage liability. I did however retain an interest in the property in the form of the charge on it when it is sold. This charge should, I anticipate, yield between £60,000-£120,000 when the property is sold (depending on how calculated and selling price.)I originally bought the property with my spouse in 1997. We paid £400,000 for it. (So I am right in thinking that my share can be seen to be £200,000?).2. I am about to buy another property, with a mortgage, for £198000, and move out of the rented house I have occupied for 5 years.
3. The marital property will be sold sometime in 2016-17, and I should receive my capital from it then. At this point, if it yields £60-£120K I can set my loss versus the £200,000 against tax? Or - at the very least - I will not be liable for Capital Gains Tax on the sum I receive? (This latter possibility is my major concern - that receiving this sum will expose me to an unforeseen tax liability?)
Have I understood this correctly?
Many thanksJo Shaw
Thanks - the property was not valued at the time of the transfer. The stipulation of the charge appears in a Land Registry document and in the terms of my decree absolute. But there were no figures attached to it at the time. Beyond this - the issue of whether I am liable for CGT. How is it affected by my ownership of another property at the point that my old property is sold? If it is immaterial whether I am a homeowner or not, then I can make a choice about whether to buy on this basis. But if my homeowning status affects it, then I need to know.If I had not divorced...and had continued to own the property with my spouse, and then we had sold and made a profit, we (and I) would not be liable for CGT? That's correct? So I am being disadvantaged by my divorced status and that this is no longer my primary home? Will my ex-spouse pay CGT when it is sold? Thanks
More information on Separation, divorce and capital gains tax can be found here