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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am in the process of divorce and whilst I still own the matrimonial

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I am in the process of divorce and whilst I still own the matrimonial home, I moved out into rented accommodation on the 7th May 2015. What I want to know is, how long do I have before I am likely to be charged capital gains tax on the house if I sell it within 2016? And how much capital gains tax am I likely to be subject to in the event of a sale? The house itself was bought in October 2012. Up until May 2015 I was living there permanently. However, I want to stress that I am still paying the mortgage on the property and hence still consider it a residence even though I am not living there, since my wife and 2 children are in the property. (Note the house was purchased for 350,000 and is currently targeted to sell for circa 450,000).
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.
Assuming you do not intend to transfer the property to your wife, that part of the gain covered by your occupation of it and the last 18 months of ownership will be exempt from Capital Gains Tax. As you moved out in May 2015, if you sell the property by 7 November 2016 you will pay no CGT.
Take a look at HS283 below for more information on the main residence and CGT:
https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief
There are two rates of CGT, 18% and 28%. The rate or combination of rates that an individual pays is dependent on the level of their income in the tax year that gains are made. The first £11,100 of gains made in the current tax year will be tax free. Take a look here for more information:
https://www.gov.uk/capital-gains-tax/work-out-your-capital-gains-tax-rate
I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.
Thanks, that's what I thought (about November) but can you indicate lets say I sell it in December 2016, or January 2017, what CGT would I pay then (assuming it sells for same price of 450,000). I am trying to understand how the CGT grows over time you see. Thanks.
Customer: replied 1 year ago.
Also, doesn't the fact that I am still the home owner (and paying the mortgage on it) provide some exemption? It somehow doesn't feel right to be penalised just because I am going through a divorce? At the very least can I offset any of the mortgage payments against the tax?
Expert:  TonyTax replied 1 year ago.
If you sold the property in January 2017, then about two months worth of the gain out of 53 months (from October 2012) would not be covered by main residence relief and the last 18 months relief. On a £100,000 gain, that's about £3,774 (£100,000 / 53 x 3). The annual CGT exemption which is currently £11,100 will cover that.
The mortgage is irrelevant. You cannot offset mortgage payments. If you could, you would get tax relief for the cost of £350,000 and whatever proportion of that you borrowed and that you repaid whilst you owned the property, ie doubling up on part of your cost. You cannot offset mortgage interest either.
As the property owner, you get exemption from CGT for the period that you lived in the property and for the last 18 months of ownership. That's it.
Customer: replied 1 year ago.
Did you mean 100,000 / 53 * 2 as I understood you said 2 months? If so I get it. So presumably if enough time passed to exceed the 11k allowance I'd be paying 28% on that gain after accounting for the 11k allowance.
Expert:  TonyTax replied 1 year ago.
Yes, I meant 2 months. I missed the typo.
If you are a 40% taxpayer, ie your income is over £42,385, then you would be a 28% CGT payer.
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