The Importance of Seeking Legal Advice When a Relationship Breaks Down.
A recent article in The Times has highlighted the importance of seeking proper legal advice upon the breakdown of a relationship. The article describes the significant Capital Gains Tax penalties an ex-husband now faces on the former matrimonial home. The couple split 16 years ago, with the ex-husband leaving the former matrimonial home and moving in with a new partner. Unusually, although this is the only property the ex-husband owns, he is now liable for Capital Gains Tax as he has not lived at the premises for 16 years.
Couples can transfer any assets between them with no Capital Gains Tax consequences throughout the tax year in which the date of separation falls. Couples separating mid-April are therefore at a significant advantage to those separating a fortnight earlier. Due to the lengthy nature of divorce proceedings, there is additional relief available to mitigate the Capital Gains Tax on transferring the main home between parties in divorce proceedings. However, by extending this relief, a party forfeits their principal private residence relief for the same period on a new home.
Due to the informality of the couple’s arrangement, there was no financial settlement. This has now left the ex-husband in a vulnerable position and potentially liable for a large Capital Gains Tax bill. Currently Capital Gains Tax on a primary residence is not charged within the first 18 months of leaving the home, although this period is due to be reduced to 9 months in April. This position could change again depending upon the outcome of the general election on 12 December. The Labour Party plans to charge Capital Gains Tax at income tax rates, meaning basic-rate taxpayers would pay 20% (instead of 18%) and higher-rate taxpayers would pay 40% (instead of 28%). Those earning more than £80,000 would pay 45% and anyone earning over £125,000 would pay 50%.
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IBB Solicitors’ family law practice can provide expert advice on all childcare and other family law issues. To contact the family law team please email firstname.lastname@example.org or call 03456 381381.
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