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HMRC internal manual

Capital Gains Manual

Private residence relief: example: spouse or civil partner entitled to share of proceeds

Mr D bought a house in January 2003 for £100,000 and occupied it with his wife until May 2008, when they separated. He bought a new house for himself whilst she remained in the matrimonial home. They divorced in May 2012.

In August 2012 the Court ordered that Mrs D should be given 1/3 of the net proceeds of sale of the matrimonial home. She moved out in February 2013 and the house was sold with vacant possession in May 2013 for £165,000, costs of sale £6,000.

The gain accruing to Mr D is computed as follows

  Disposal proceeds 165,000
less costs of sale 6,000
  net proceeds 159,000
less Cost 100,000
  Net gain 59,000

Mr D’s Private residence relief

  • Period of ownership January 2003 - May 2013 = 125 months
  • Period of only or main residence

January 2003 - May 2008 = 65 months

  • Final period allowed by TCGA92/S223 (2) = 36 months*

The relief is 65 + 36 x £59,000 = £47,672


The chargeable gain is £11,328 before annual exempt amount.

Mr D is not entitled to a deduction for the £53,000 (that is, 1/3 x £159,000) paid to Mrs D, because this sum is an allocation of the proceeds and not a deduction in arriving at the gain.

Mrs D is not chargeable to Capital Gains Tax on the £53,000 she has received. It represents financial provision for her ordered by the Court and is not a sum received in consideration for the disposal of an asset.

*If the house had been disposed of on or after 6 April 2014 the final period exemption would be limited to 18 months see CG64985.