Q&A: I’ve been pushed out of the main home, will I have tax to pay when we sell?

Tax Advice » June 17, 2021

Each week we receive numerous enquiries from clients which are usually quite quick to answer.  Over the coming weeks, we will be publishing some of the questions received and our answers to them.  Please note we have changed some parts of the questions to protect our client’s information.

Question:

I am trying to grapple with all the elements involved in divorce…And have come across capital gains whispers around dividing our home. I was pushed out of our home 22 months ago on the idea and request of my wife to end our constant arguing together. I did so voluntarily for the sake of the children, and have been around the corner in a rented one bedroom flat. We both pay half the mortgage and half the rent on flat. I stay there on occasion for a week at a time in residence when she is away with work. We don’t want to sell the main house, but are about to enter a mediation process and I am trying to find out what my situation is regarding possibly selling the property.

Answer:

In brief, it is likely you will have to pay capital gains tax when you sell the home.

When you sell a property in the UK, the gain is taxable. The tax payable is Capital Gains Tax (CGT) which is charged at either 18% or 28%.  It might be possible to exempt some or all of the gain when you sell a property if you have lived in that property as your main home. This relief is called Principal Private Residence (PPR) relief. 

PPR relief is given for the periods of time you were actually living in the property. Therefore, if your wife continued to live in the property, she will not have any tax to pay when the time comes to sell the property as she will have lived in it for the whole period of ownership. You will be able to exempt some of the gain on sale of your share of the property. You will qualify for PPR relief for the period of time you lived in the property plus an additional nine months.

The relief is given as follows (time you lived in the property + nine months / total period ownership) x the gain.

If you are able to transfer the property to your wife, you may be able to claim PPR relief for the whole period of time you were not living in the property.  This is called s.225b relief, but certain conditions need to be met to claim this. If you were able to claim s. 225b relief, there would be no tax payable when you transfer the property to your wife, and no tax payable when she sells the property.

Note: there are some circumstances where individuals can claim deemed occupation periods when they have not been living in the home but these are usually in the circumstances where their work has prevented them from living in the property.

Resources & Reports

There is a lot of useful information about this relief on HMRC’s website. 

Clients can check here to see if they are entitled to full PPR relief. 

If they are not entitled to full PPR relief and need to work out their gain, they can do so here (this link is limited in helpfulness as it asks the individual to calculate their own PPR relief, but it can be useful starting point).

We now offer a fixed fee ‘Tax on the Family Home’ report for £995 plus VAT (subject to certain conditions). It covers the tax position for both parties on sale and transfer, plus tax mitigation strategies. You can get in touch with us by email at enquiries@thomas-consulting.co.uk.

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