Stamp duty and the sale of the marital home

Stamp Duty from the sale or transfer of property as a result of divorce 

Often, when parties divorce, the resulting tax implications of any sale or transfer of property does not form their first consideration. However, it is important to understand the rules in relation to stamp duty land tax (SDLT) when it comes to selling, or transferring, your share of the matrimonial property to ensure this is considered in advance of any final settlement.  

Generally, all transactions in connection with divorce and made in pursuance of a court order in respect of your finances are exempt from SDLT. This contrasts with transfers between married couples, which do not benefit from this general exemption.  

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What is stamp duty? 

SDLT constitutes tax paid by the buyer of any UK property over a certain value, or for a property transfer where anything of monetary value is given in exchange (known as chargeable consideration). How much SDLT is owed depends on various circumstances, such as: 

• The value of the property  

• The SDLT threshold at the time  

• Whether the property is residential or non-residential  

• It is a first-time buyer  

• Whether the party owns any other property  

Stamp duty and married couples 

While there is no SDLT exemption for transfers between married couples, the 3% surcharge for additional dwellings does not apply for spouses transferring property to each other, and normal residential rates will be charged. This is not the case for spouses who, living together, wish to purchase properties individually, as they will each be treated for SDLT purposes as owning properties owned by their spouse. 

Joint ownership of property and divorce 

In the case of divorce, if you transfer an interest in your property to your partner as part of your financial agreement (in other words, under the court order granting the divorce) then no SDLT will be due. This is provided that only you and your partner are parties to the transfer. There is no need to tell HMRC about the transfer even if the value of your property exceeds that of the current SDLT threshold.  

Is stamp duty payable if I transfer a property in my name to that of my partner? 

If a property is in yours (or your partner’s) sole name and is transferred from one to the other as part of a divorce, then the receiving party will not need to pay any SDLT, as this is considered exempt. 

Is stamp duty payable if I transfer more than property in my name to that of my partner? 

If more than one property is transferred to the sole name of either party in a divorce, then as long as the transfer is made as part of the financial agreement as a result of your divorce, no SDLT will be payable for the transfer of any of the properties.  

Is SDLT payable if I sell to a third party after a divorce? 

If you sell your property to a third-party purchaser after your divorce, then the buyer will pay SDLT in the usual way. You will not be responsible for the SDLT as the seller of the property, however.  

Is SDLT payable if I purchase a new property from a third party before, during, or after, a divorce? 

If you purchase a new property either before, during, or after your divorce, then this may well give rise to an SDLT charge. The SDLT due will be dependent on your circumstances outlined above, such as the value of the property and whether you own any other property. If you have a solicitor, agent or conveyancer acting for you, then they will usually file the SDLT return and pay the tax on your behalf on the day of completion, adding the prescribed amount to their fees.  

However, in circumstances where a party has sold their only or main residence and then proceed to buy a replacement from a third party within three years, they qualify for the main residence replacement exemption. As such, they would not have to pay SDLT in these circumstances, so long as their spouse has not already claimed this exemption for themselves.  

Is stamp duty payable if I purchase a new property from a third party after separating from my spouse? 

To be exempt from stamp duty, you must have transferred your interest in the property under the court order granting the divorce. As such, where a couple have decided to separate permanently but without getting a court order, this exemption does not apply. However, separation is relevant for purposes of the 3% surcharge for additional dwellings. This is because, in these instances, separated couples are to be treated as an unmarried couple, and as such will not be treated as owning any property their spouse owns. 

Seeking professional legal advice 

SDLT matters can be complex and very often hinge on timings. As such, to ensure the best approach to purchasing or transferring interests in property before, during, or after your divorce, it is worth seeking professional legal advice. Vardags have an experienced divorce and property department who can assist you in these matters.