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TonyTax
TonyTax, Tax Consultant
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I am currently going through a divorce & I want to know what

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I am currently going through a divorce & I want to know what the implications are for CGT. My husband & I purchased our matrimonial home jointly for £480k in 2005. A couple of years later we also purchased a buy to let property jointly. We separated in 2011 at which point I moved in to the buy to let property & he remained in the matrimonial home. We are now going through a divorce. He runs his business from home & intends to remain where he is. The plan is for him to pay me a lump & transfer the property in to his name. The buy to let property is to be sold & I am to retain the proceeds. We purchased this for £133k & it is valued at £145k. The matrimonial home is valued at £530k. I am trying to find out what Capital Gains Tax I would be liable to pay.
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.Can you tell me which month in 2005 you bought the matrimonial home and which month in 2011 you separated please. Would you also let me know in which month and year you bought the buy to let property.
Customer: replied 1 year ago.
Hi. We purchased the matrimonial home in June 2005 and we separated in May 2011. The buy to let was purchased in April 2007.
Expert:  TonyTax replied 1 year ago.
Thanks.
I'll get back to you with some figures.
Expert:  TonyTax replied 1 year ago.
Hi again.
There is some useful information on the main residence and CGT in separation and divorce situations here:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323663/hs281.pdf
For the purposes of my calculations I've assumed the transfer and disposal take place in December 2015.
MATRIMONIAL HOME
You will be treated as having sold your share of the property at its market value so you will have a gain of £25,000 (£530,000 - £480,000 / 2). By December 2015, you will have owned the property for 127 months of which you lived in it for 72.
The gain for the period covered by your occupation and the gain for the last 18 months of ownership will be tax free. That accounts for £17,717 (£25,000 / 127 x 90). The remaining taxable gain is £7,283 (£25,000 / 127 x 37).
BUY TO LET PROPERTY
Your share of the gain will be £6,000. By December 2015, you will have owned the property for 105 months of which you will have lived in it for 53. I'm assuming it was let from the date of purchase or thereabouts to April/May 2011, 52 months.
The gain for the period covered by your occupation and the gain for the last 18 months of ownership will be tax free. That accounts for £4,057 (£6,000 / 105 x 71). The remaining taxable gain is £1,943 (£6,000 / 105 x 34). That will be covered by letting relief of £1,943 (the lesser of £40,000, £4,057 and £1,943).
SUMMARY
You will have a net taxable gain of £7,283 which will be covered by the annual CGT exemption of £11,100 so there will be no CGT to pay assuming you have no other gains that take your total over £11,100.
The fact that your husband is giving you his share of the disposal proceeds of the buy to let property doesn't affect the CGT position. Cash payments as part of a divorce settlement are tax free.
The costs of selling a property (legal fees, selling agent fees etc) can be taken into account in computing the gain.
I hope this helps but let me know if you have any further questions.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15755
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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Customer: replied 1 year ago.
That's great. Thanks ever so much for your help,
Expert:  TonyTax replied 1 year ago.
Thanks and good luck.

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