Consumer rights: Must I pay tax on sale of marital home after split?

A divorced man worries about capital gains tax...a debtor checks out the credentials of debt management scheme and what to do when a bank reduces the amount it will lend


My wife and I separated at the beginning of 2008 and I moved into a small flat I had before we got married. We put our house on the market two years ago and it's taken until last week to sell.

We divorced at the beginning of this year – two years after we separated – and we agreed who would get what share from the sale so there was no court involved in the finances. I always thought there would be no tax to pay in the same way that you don't pay tax on your family home if you move, but I've been told that because we're divorced that's not the case. Can you help? I don't want to talk to an accountant in case the friend is right!

ST, Bristol

I'm assuming that you and your ex-wife owned the house jointly. It's CGT (Capital Gains Tax) that applies to the sale of property. If you sell your PPR (Principal Private Residence) it is normally exempt from CGT. The family home is usually the PPR but if you have more than one property you should make sure there's no doubt about that at a later date by telling HM Revenue and Customs which one is your principal or main residence.

In your case, though, when you moved out, the family home was no longer your PPR. So there are some situations in which a husband or wife leaving home could be liable to pay CGT on their share of the proceeds of the sale. But the good news is that there is a three-year window, in case it takes a long time to sell a PPR. Under that rule the tax relief is normally available up to three years after a husband or wife has left the home they shared – even if the one who has left has bought a new home. In your situation, from what you've told me, you're unlikely to have to pay CGT.

As with any sort of tax, the rules about CGT are very complicated. In many cases people who have been separated for longer than three years, but have transferred the property to the spouse who still lives in it as part of the divorce, will be exempt from CGT, even after the three-year window. For anyone separating and splitting up property or any other type of assets it would be useful to talk the situation through with a tax adviser. John Whiting at the Chartered Institute of Taxation says: "The rules around the CGT exemption on a main residence are surprisingly involved. In a situation like this, even when the split is amicable, it's best to protect both spouses by making sure the situation is addressed in any divorce settlement and that both parties are clear what is going to happen."

*****

I'm in debt and have contacted a debt-management company which says I can lump all my loans into one so that I just have to make one payment every month – to them – and they'll pass on a share of that money to everyone I owe money to. I'd like to go ahead with this as I'm so depressed about it all that I can't manage the payments myself. But is there anything that can go wrong?

JR

West Yorkshire

I've had a look at the site of the company you're thinking of doing business with and they are offering a standard type of debt-management programme. One of the firm's agents negotiates with your creditors to have some of your debt written off and/or your monthly repayments reduced. Once those reduced payments are agreed the agent manages the debt for you.

The advantage to you is that you only have to worry about making a single payment each month and while you stick to that the creditors should leave you in peace.

Everything looks above board and there's nothing wrong with the system they're suggesting. Of course the firm has to get paid for its work and it will take 15 per cent of the total monthly payment you make as its fee. If your full monthly payment went to your creditors you might well clear your debts quicker. But that's a difficult calculation to make as it depends on how much of your total debt the firm manages to persuade your creditors to write off.

There are charities which do the same job for you but don't take a fee. They are often busy and you might have to wait for an appointment. In the meantime you have to carry on dealing with creditors who could put more pressure on you to pay up. So you might feel happier to use a debt management firm that can help you immediately. But consider that organisations such as your local Citizens Advice Bureau will see you in person and can help you with more than just the debt problems. If there's anything else that's worrying you and contributing to your depression the CAB could be a better option. You'll find their details in your phone book.

Whatever you decide, if you ever find you can't make that single monthly payment get help straight away. Otherwise the whole plan will unravel and one or some of your creditors could start legal action.

*****

My bank gave my partner and me a tracker mortgage a few years ago. We have children now and need a bigger place. My partner is no longer earning but despite that we've never missed a payment. When we recently renewed our mortgage on a three-year fixed deal we mentioned we'd like to move soon. The bank is now saying that if we move the amount they'll lend us will go down by £40,000. Even though prices have risen since we bought there's little hope of finding anywhere bigger without that £40,000, so we're trapped. If we find another lender who will offer us more we face a big redemption fee. Is there any way out?

FP

South London

Any lender is within its rights to offer you less money on a new mortgage and many are lending less now than even a few months ago. The problem is that you went for the fixed-rate deal, which seemed the best, but there is no way out of it without paying the redemption penalty.

Had you taken advice from an independent mortgage broker at that time he or she may have been able to find you a better deal with another bank that would have lent you more when you move.

But there is a glimmer of hope. Andrew Lawrence, mortgage adviser at Peace of Mind Financial Solutions in Scarborough, says: "Most lenders now use an affordability calculator to work out how much you can afford to pay monthly. What's seen as affordable goes up and down depending on the lender's appetite to lend. I negotiated a mortgage at the beginning of the year and have just done another in the same circumstances, but the same lender has agreed to lend the second client £20,000 more. Go back to your bank from time to time and ask them to look again at the amount they're willing to lend."

www.moneyagonyaunt.com

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
The surrealist comedian at the Q Awards in 2010
people
News
Russell Brand arriving for the book launch in East London
peopleRussell Brand cancels his book launch debate due to concerns about the make-up of the panel
Sport
Christiano Ronaldo enjoys his opening goal
champions leagueLiverpool 0 Real Madrid 3: Ronaldo and Benzema run Reds ragged to avenge thrashing from their last visit to Anfield
Arts and Entertainment
Awesome foursome: Sam Smith shows off his awards
music22-year-old confirms he is 2014’s breakout British music success
PROMOTED VIDEO
Life and Style
Six of the 76 Goats' cheese samples contained a significant amount of sheep's cheese
food + drink
Arts and Entertainment
Contestants during this summer's Celebrity Big Brother grand finale
tvBroadcaster attempts to change its image following sale to American media group
Extras
indybest
Arts and Entertainment
Sir Nicholas Serota has been a feature in the Power 100 top ten since its 2002 launch
art
Arts and Entertainment
Sarah Dales attempts to sell British Breeze in the luxury scent task
tvReview: 'Apprentice' candidate on the verge of tears as they were ejected from the boardroom
News
Call me Superman: one of many unusual names chosen by Chinese students
newsChinese state TV offers advice for citizens picking a Western moniker
News
Wilko Johnson is currently on his farewell tour
people
Voices
New look: Zellweger at Elle's Women in Hollywood awards on Monday
voicesRenée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity, says Amanda Hess
News
Let’s pretend: KidZania in Tokyo
educationKidZania lets children try their hands at being a firefighter, doctor or factory worker for the day
Life and Style
CHARGE BOOSTER: Aeroplane mode doesn't sound very exciting, but it can be a (phone) hacker's friend. Turning on the option while charging your mobile will increase the speed at which your phone battery charges
techNew book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone
Arts and Entertainment
Julianne Moore and Ellen Page are starring together in civil rights drama Freeheld
film
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    IT Systems Business Analyst - Watford - £28k + bonus + benefits

    £24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

    Trainee Recruitment Consultant Birmingham

    £18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

    Trainee Recruitment Consultants

    £20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...

    Day In a Page

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
    Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

    'Renée Zellweger's real crime was to age'

    The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
    From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

    Disney plans live-action remakes of animated classics

    From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
    Thousands of teenagers to visit battlefields of the First World War in new Government scheme

    Pupils to visit First World War battlefields

    A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
    The 10 best smartphone accessories

    Make the most of your mobile: 10 best smartphone accessories

    Try these add-ons for everything from secret charging to making sure you never lose your keys again
    Mario Balotelli substituted at half-time against Real Madrid: Was this shirt swapping the real reason?

    Liverpool v Real Madrid

    Mario Balotelli substituted at half-time. Was shirt swapping the real reason?
    West Indies tour of India: Hurricane set to sweep Windies into the shadows

    Hurricane set to sweep Windies into the shadows

    Decision to pull out of India tour leaves the WICB fighting for its existence with an off-field storm building
    Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

    A new American serial killer?

    Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
    Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

    Sting to trap paedophiles may not carry weight in UK courts

    Computer image of ‘Sweetie’ represented entrapment, experts say
    Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

    Return to Fukushima – a land they will never call home again

    Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
    Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

    Wildlife Photographer of the Year

    Intimate image of resting lions claims top prize
    Online petitions: Sign here to change the world

    Want to change the world? Just sign here

    The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?