The recently published 2014 budget changed the tax status on properties owned by divorcing or separating couples.
Currently, homes designated a main residence are free from capital gains tax when sold, and married couples are allowed only one such property. If a person changes the home designated as their main residence, the final three years in which the first property was their main residence remain free from capital gains tax, even though they longer live there. This exemption allowed time for the first property to be sold.
Under the Taxation of Chargeable Gains Act 1992, a divorced or separated person who had moved out of a couple’s home could continue to claim tax relief on properties they owned or jointly owned, even if their former partner still lived in the home, Family Law Week reports, provided the former did not declare another property their tax-free residence.
However, the three year tax-free period has now been reduced to 18 months, so tax will become due on properties not occupied by their owner for longer than that period.
Photo by Pat Scullion via Flickr under a Creative Commons licence