Transfer of mortgage - Payment question

I purchased a house with an ex partner many years ago. We had young children who are now adults. I left the property as I had somewhere else to rent and my ex continued to live there and pay the mortgage. I have rented since and have never gotten another mortgage as I couldn't raise the deposit as house prices continued to rise.

He is finally in a position to take over the mortgage alone as the term and remaining balance have reduced and we have agreed on a payment that takes my initial input into account. The bank will remove my name from the mortgage and deeds and he thinks the payment will be transferred to me at some stage in the process.

My question is do I need to declare the amount I will receive for my share in the property and will I pay tax on it? Is it considered a gift or sale?

I would like to keep this money for our children so they can put it towards their future house deposits but I do not want them to access the money until they are buying their homes.

I would be grateful if you could shed any light on what I need to do.

Get a solicitor involved to review the transaction for you before anything further happens.

Lostlucky said:

The bank will remove my name from the mortgage and deeds and he thinks the payment will be transferred to me at some stage in the process.

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Why the uncertainty?

Lostlucky said:

I left the property as I had somewhere else to rent and my ex continued to live there and pay the mortgage.

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Lostlucky said:

My question is do I need to declare the amount I will receive for my share in the property and will I pay tax on it? Is it considered a gift or sale?

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Whose name(s) was the house in - i.e. whose name was on the deeds? One of you or both of you?

If you are a partial (50%?) beneficial owner then your portion of any gain from the sale may be assessable for CGT with some relief in respect of the time that it was your PPR.

If you were not a beneficial owner then any payment that you get may be assessable for Capital Acquisitions Tax/Gift Tax.

Very difficult to say for sure on the basis of the information provided.

If in doubt get professional advice on the legal and tax issues.

Thanks for the replies. The house was purchased as a joint tenancy so 50% each with a tracker mortgage.

The uncertainty is because the process has only begun and he has only been approved in principle. He will now get his solicitor involved so maybe it will become clearer then.

The house won't be sold so there isn't a gain from a sale? He is just taking on the remaining mortgage alone and the house will be in his sole name on the deeds. Or is him getting my 50% considered a sale?

I was hoping not to have to engage a solicitor as we are both happy to have it resolved but I need to know my tax liability if any so will look into speaking to a solicitor. Thanks

Lostlucky said:

The house won't be sold so there isn't a gain from a sale?

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Aren't you effectively selling your share to him?
And that is likely to be assessable for CGT likely with some relief as I mentioned above.

So revenue see the transfer of ownership as a sale so I would be liable for CGT of 33%.

Since I am selling my 50% of the house at a massive loss would I still pay tax?

It will be difficult to show evidence of my deposit and expenditure from the purchase and time living there as the bank has closed.

Thanks for your help. If I have a 33% tax liability I am barely getting my costs back.

Lostlucky said:

Since I am selling my 50% of the house at a massive loss would I still pay tax?

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No. Capital Gains Tax only arises for a gain. If you incur a loss you can write it off against a future capital gain. (You may be to file a return to record the loss but I'm not sure/can't remember).

What are the indicative figures involved here?

Lostlucky said:

It will be difficult to show evidence of my deposit and expenditure from the purchase and time living there as the bank has closed.

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CGT is a self assessed/returned tax so if it arises then the lack of such documentation may not be a showstopper. You may not even be asked for it unless challenged or audited. But this may be moot if there is no gain in the first place.