Stamp duty land tax (SDLT) and transfers of ownership on marriage and divorce
There are various situations in which land or property may be transferred between couples. This may happen near the start of a relationship when they set up home together or marry or enter into a civil partnership. It may also happen at the end of a relationship if the couple separate or divorce. The extent to which any SDLT is payable will depend on the circumstances and also whether any consideration changes hands.
SDLT is payable by reference to the consideration received. This may be in cash but can also include discharging a debt (so, for example, if a spouse takes on a share of the mortgage, this will count as consideration).
Example 1: Consideration below the SDLT threshold
Harry owns a house, which is valued at £200,000. Harry transfers a 50% share in the property to Sophie. She gives him cash of £100,000 in return.
The total consideration is £100,000. This is less than the SDLT threshold of £125,000. Consequently, no SDLT is payable on the transfer.
Example 2: SDLT payable but no cash changes hand
Following their marriage, Karen moves into her husband Ian’s house. The house is worth £600,000 and Ian has an outstanding mortgage of £400,000. Karen takes on a 50% share of the mortgage. She is not a first-time buyer and she does not own any other property.
Although no cash changes hands, the consideration for the transfer of ownership is equal to the share of the mortgage assumed by Karen. This is equal to £200,000 (50% of £400,000). As this is above the SDLT threshold of £125,000), SDLT is payable.
The SDLT payable is £1,500 ((£125,000 @ 0%) + (£75,000 @ 2%)).
Example 3: Gift
Edward moves into Elsie’s house following their marriage and she gives a 50% share of the property to her new husband. The house is worth £400,000 and Elsie owns it outright.
No cash changes hands and as it is a gift there is no consideration. Consequently, no SDLT is payable, even though the value of the transferred share is more than the SDLT threshold.
Example 4: Separation, divorce or dissolution
Chris and Alison separate and he moves out of the family home. Alison buys him out, paying him £250,000.
Where a transfer of ownership takes place on separation (where the circumstances are such that the separation is likely to prove permanent), or on divorce or the dissolution of a civil partnership, no SDLT is payable. Consequently, Alison does not have to pay SDLT on her acquisition of Chris’ share of their marital home, even though the consideration is more than the SDLT threshold.
Consider the circumstances and the consideration
Whether the transfer of ownership triggers an SDLT bill will depend on the circumstances and the amount of consideration, if any.