Q I have a tenant in common mortgage with my ex-husband on our former marital home that he has been living in. He is now in a position to buy me out of the property and will either continue to pay the small mortgage or pay it off in full.
We have agreed the price and have started the process of contacting the mortgage lender and so on, but I was wondering whether this “sale” would have any tax implications for me?
AN
A You may face a capital gains tax (CGT) bill, but then again, you may not. The definitive answer depends on the timing of the transfer (i.e., the buyout), when you stopped living together, and whether you are formally divorced.
If you are selling the matrimonial home, which benefits from private residence relief, there should not be a CGT bill, as it is likely to apply in your case. However, if you sell a property, such as a buy-to-let house that does not qualify for private residence relief, different rules apply.
There will be no CGT bill if you sell your share of the house (or any other asset) to your ex-husband in a tax year when you were still living together for at least part of it.
This is because married couples and people in civil partnerships benefit from the no gain/no loss rules, making transfers of assets between spouses and civil partners CGT-free.
However, since 6 April 2023, if you are separated, you can transfer assets between you without incurring CGT until the end of the third tax year after the financial year in which you separated (or, if earlier, the date of your divorce or separation order).
According to Patrick Cannon, a barrister who published a Guide to CGT on Divorce and Separation, transfers between you after the third tax year remain CGT-free if the assets are the subject of a formal separation agreement or divorce order. If they are not, there will be a CGT liability.
The government’s “Get a Divorce: Step by Step” guide states that the rules for determining your gain (or loss) are complex and suggests contacting HM Revenue and Customs or seeking professional tax help.
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