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!
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?
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?
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."