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Where Taxpayers and Advisers Meet

Divorce, CGT & Private Residents Relief

Wilson1478
Posts:1
Joined:Mon Apr 26, 2021 3:02 pm
Divorce, CGT & Private Residents Relief

Postby Wilson1478 » Mon Apr 26, 2021 3:30 pm

Hello all,

I was hoping to get an idea of my potential CGT liability;

My wife and I bought our house, which was the primary residence for us both, in 2008 for £260k.

Unfortunately we divorced in 2015. As part of the settlement, I had to buy out her half of the equity. The house was valued at £400k, with £100k mortgage outstanding, i.e. I had to pay her £150k (via another mortgage).

I continued to live in the house as my primary residence until 2018, at which point I rented it out as I got a job in another part of the country.

After three years of renting it out, I’m now looking to sell the house, which has recently been valued at £500k.

I am wondering if the divorce and me having to buy her half of the equity affects the point at which Private Residents Relief is applied, and to what value? And therefore what effect this would have on my broader CGT liability as I am in the higher tax bracket.

Many thanks

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Divorce, CGT & Private Residents Relief

Postby maths » Mon Apr 26, 2021 8:11 pm

Assume house sale 2021.

Owned 13 yrs
Private residence 10 years

Assuming you do not return to live in the property before sale:

Gain = 500k - [130k + 150k] = 220k

Exempt part = [[10 + 0.75]/13] x 220k = 182k

Chargeable part 220k - 182k - 12k= 26k

CGT = 28% x 26k = 7,280.


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