Do I have to pay Capital Gains Tax if I sell the property I own with my ex-girlfriend?
Q: I bought a property as a joint tenant with my then girlfriend 10 years ago. We split up, and I moved out. I have continued to pay her my share of the mortgage, but have not lived in the property since 2011. If we now agree to sell the property, am I liable to Capital Gains Tax on the proceeds?
Our expert advises a member on capital gains tax on the property he owns with his ex.
The existing ownership structure “Joint Tenants” is the usual default for jointly owned properties, which means that if something happened or one party was to die, the other would take over ownership and responsibility of the property, without their share forming part of a will or otherwise assets . For simplicity of a generic response, I am assuming that you own the property equally and that no contention exists with regard to one party owning a larger share.
As the home was your principle residence, it enjoys the tax treatment rules of a main residence i.e. free of capital gains tax. Thus from 2005 through to 2011, any gains made would fall fully under this element.
Things get slightly more complicated post 2011, as your ex partner has maintained the property as her main residence. Thus, she would continue to enjoy her share of any growth since, free of capital gains status on her share of the property. You could apply for “final period relief”, which would take into account your time when this was your main residence and 18 months thereafter, so only some of the gain on sale would be subject to capital gains tax.
You mention that the mortgage has been paid by your ex partner, however you have continued to pay her your share. Any agreement you have that can document who pays the mortgage after separation may make a difference, depending on what share of the property you each own. This is an area where you should get legal advice.
Again for simplicity, it is assumed that no other complications on your contributions could be claimed to be in respect of any other cost, such as child maintenance for example.
You can deduct costs of buying, selling or improving your property which reduce your capital gain such as :
- estate agents’ and solicitors’ fees
- costs of improvement works, e.g. for an extension (normal maintenance costs don’t count, eg for decorating)
Thus, in simple terms the equation is your share of sales value minus your share of market value when you ceased to be your main residence, plus capital expenditure since that time.
You will not be able to claim any relief on the interest element paid on the mortgage. This is the opposite to what most people would expect, as this element would normally be something you could offset against any rent received if you let out the property. From your brief outline, it would appear that you have gifted the interest and repayment element to your ex partner, however this is unclear and any agreements you have in writing may assist you in this aspect. Likewise, you may have an agreement that this element is to be repaid to you from your ex-partners share.
The above is based on limited information and should not be deemed to be specific advice, as this can only be given when working with a knowledge of the full circumstances
Pierre Coussey MCSI, APFS, IMC
Chartered Wealth Manager & Chartered Financial Planner
Bond Wealth Management Ltd
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