Postby someone » Wed Apr 14, 2021 5:55 pm
I assume you are going to continue living in it as your home for the 10 years?
Therefore there will be (under current laws), no CGT to pay on your share.
I also would assume your ex used to live there but will no longer. He will have to pay CGT on the increase in value of his share from when it was bought to when it is sold (there is some relief from tax for the periods he lived there)
You don't say how long it's already been owned, not how long your ex lived there. Therefore for this example I'm assuming your ex never lived there and you bought it for 360K.
Your share when bought: 240K (this is called base cost)
You ex's share when bought: 120K (his base cost)
Lets assume it sells for 570K (this is roughly 5% per year appreciation)
Your share at sale: 380K
Your ex's share at sale 190K
Your ex's gain is 190-120 = 70K
Under current rules he gets about 12K tax free and then pays 28% on the rest. so (approx) 16K in CGT tax will be due.
Under the solicitor's proposal:
Proceeds after tax: 570-16=554.
You get: 370K (so you've paid 10K of the tax bill)
your ex gets: 184K (so he's paid 6K of the tax bill)
Only you can decide whether you think this is equitable. I can see reasons for thinking it is fair (if your ex could have his share now he could invest it in his own home and the gain would be tax free) and reasons for thinking that it's not equitable (why should you pay the majority of the tax that is down to your ex being a higher rate taxpayer. You'd pay 18% on some of it if it was your gain - your total bill night not be 10K if it was all your bill. So your paying more on behalf of your ex than you would have to pay for yourself!
I'm not exactly sure how this "you pay his CGT bill works" Because you're paying 10K of his bill so actually he's getting 10K more and you're getting 10K less - but now he has to pay 28% tax on that 10K too. Perhaps there's an easy way around that.
Also note:
CGT rates might change - possibly to 40 or 45%. And CGT allowance might reduce - possibly to only a few K. So tax due could easily be 30K in 10 years time on the same figures due to law changes. And if you're paying 20K of that then there could be yet another 10K to pay - of which you're paying 6K etc. Effectively you'll end up paying almost 30K in tax on his 30K tax bill!
Possibly better would be to give him a few percent more now and let him pay his own tax bill. An extra 3% to him should approximately cover the 16K bill I've estimated above.
(don't rely on any of this. I've done it by "finger in the air" guess work, not calculation)