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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Private residence relief: separation, divorce or dissolution of civil partnership: example: transfer of interest

Mr & Mrs B jointly bought a house in May 2004 for £50,000. It was occupied as their only or main residence from July 2006 until they separated in November 2008. Mrs B continued to reside in the house while Mr B left the house and bought a new house in December 2008 which he occupied as a residence

The couple were divorced in January 2013. In May 2013 the Court ordered Mr B to transfer his half share in the matrimonial home to Mrs B. The interest was conveyed to her in July 2013.

To compute the gain accruing to Mr B you need the market value of a half share in the matrimonial home in May 2013, see CG22505, subject to Mrs B’s rights of occupation under the Matrimonial Homes Act 1967. CG74320+ explains how to obtain this valuation from the Valuation Office Agency

The Valuation Office Agency tells you that the value of the half share in May 2013 was £150,000 with vacant possession, but reduced to £60,000 subject to Mrs B’s rights.

Mr B’s gain is computed as follows

  Disposal proceeds 60,000
less Cost 1/2 x 50,000 25,000
  Net gain 35,000

Private residence relief

  • Period of ownership May 2004 - May 2013 = 109 months
  • Period of only or main residence

July 2006 - May 2013 = 83 months

The relief is 83         x £35,000 = £26,651


The chargeable gain is £8,349 subject to annual exempt amount.

A claim for TCGA/S225B to apply may not be to Mr B’s advantage. Mr B would obtain increased relief on the transfer of his interest in the matrimonial home but would lose relief on his new home for the period between December 2008 1988 and May 2013.