The breakdown of a marriage is an emotional and stressful time, and inevitably the tax implications of separation is not the first thing that parties tend to consider. When reaching an agreement in respect of the matrimonial finances, however, it is important to properly consider any tax issues to ensure that any outcome works practically for both parties and to avoid any unexpected hidden costs and unwanted surprises.
It follows that it is important to understand the rules in relation to Stamp Duty Land Tax (SDLT) when it comes to selling or transferring property – normally the family home – to ensure this is considered well in advance of any financial settlement being reached.
What is SDLT?
SDLT is a well-known tax in the context of conveyancing transactions – it is payable by individuals purchasing a property in England over a certain value (or where there is a transfer of a property for chargeable consideration, meaning an exchange for monetary value). The amount of SDLT due depends on several factors and the easiest way to calculate your liability is to use the Government’s online calculator.
SDLT and Divorce
Whilst each case will turn on the facts, and specifically on timings, generally all transactions in connection with divorce and made in made under a court order in respect of the matrimonial finances are exempt from SDLT.
In practice, this means that if you transfer your interest in your property to your partner as part of your financial agreement then no SDLT will be due (provided that only you and your partner are parties to the transfer). This is widely unknown but important to understand and contrasts with transfers between married couples. It is always prudent, however, for parties to obtain specific and tailored tax advice – particularly where there are multiple assets and transactions taking place across different jurisdictions.
Example: Ben and Emma are getting divorced. They currently live with there three children in a house which is legally owned by Ben. As part of their financial settlement, it has been agreed that Ben will transfer his interest in this property to Emma in exchange for her paying him a lump sum. This is recorded into a financial consent order which has been approved by the court. This is an exempt transaction, meaning Emma does not need to pay any SDLT.
Get in touch:
Our expert team of family solicitors can help draft any agreement you reach as part of your divorce into a binding and enforceable financial consent order.
We can also help you with a range of other issues, including domestic abuse, family disputes, divorce, dissolution, and child arrangement matters.
To discuss any of the issues raised in this note, or to find out how we can assist you further, please telephone us on 01494 451355 (High Wycombe office), 01628 958445 (Marlow Office) or 020 3443 9576 (City of London office). Alternatively, you can email us at family@curzongreen.co.uk.