Post Divorce Use of Equity

Hello,

I was wondering if someone might be able to help regarding post divorce rights to increasing value of divided assets.

My ex-wife and I divorced over two years ago with the Decree Absolute occuring in the september of that year. The settlement was said to be a Clean Break with respect to assets and additionally included me paying a CM of around 20% for our two 2 kids which varies annually on the basis of actual earnings.

To execute the asset split I paid her a significant sum of cash to buy her out of the FMH funding this by taking on a very large mortgage and a lodger. I have over the past year found a new partner and recently moved into her home enabling me to fully rent out the previous FMH which I have owned solely in my name for the past 2 years.

The ex is now demanding 20% of that rental income claiming it should be treated as earnings.

To my mind this is unreasonable as how I invest my wealth and the associated returns are my business alone and she has no claim on this subsequent to the clean break divorce. Is there clear guidance on this?

Best Wishes
shes_a_b

Actually, I think your ex may be correct. It is income that is taken into account when assessing cm payments.

My ex was highly furious that as well as the income from his salary, the income from his pension is also taken into account.

Its all taxable income that is taken into account and rental income is taxable.

Why on earth did you tell her?

Do you pay via CSA?

If so yes rental income does count as income.

You may well find that your court order is the same, does it specify earnings or income.

Bear in mind though that you will be able to deduct a lot of costs before arriving at the taxable income figure for your rental property especially if you have a mortgage on it. In fact it might be nothing or next to nothing by the time it is calculated.

As Wyspecial says only the amount of the rental you pay tax on would be included in CSA calculations, not the whole amount.

It my understanding that the first £3k of rental income is tax free, but not sure if this is just if you rent out a room not the whole property.

Thanks all - very helpful,

@sillywoman. I love my kids and travel london-Manchester alternate w/e to spend time with them away from their mother. I also have them over school holidays. Wonderful as they are, they have voices of their own and subterfuge would not be practical even if I did wish to take that approach.

@wyspecial. Good point, our arrangement does not involve the CSA. I will review the specific wording of the CO.

@jaymdee. The house is rented in entirety so sadly the rent-a-room allowance does not apply.

...

The concept of artifically increasing the rental deductions to make an annual taxable loss thereby reducing the CM payments from their current level based solely on earnings is interesting. Perhaps I could fully renovate the house in every way possible sparing no expense over the next few years before selling it after the CM payments apply. Perhaps I''ve been a little slow on the uptake and that''s the real reason why buy-to-let has grown so quickly at the same time as the divorce rate. All seems a bit underhand for my style to be honest but interesting nonetheless.

Thanks again,

You are a decent bloke and I totally agree with you. What you have chosen to do with your settlement should be to the advantage/disadvantage of yourself. Sometimes,the system stinks.

My ex was up in arms when he found out that he would have to pay some of his taxable pension income towards his children, but he does nothing else for them, doesn''t see them, give them anything, cancelled their cheap mobile phone contracts. So I don''t feel bad.

Would love my kids to have a father who cared.