In this brief guide, we are going to discuss Unmarried couple stamp duty and how unmarried couples can potentially reduce their stamp duty liability.
Unmarried couples stamp duty considerations when buying
When looking to apply stamp duty charges, HMRC will look at those listed on the title of the property and apply stamp duty charges based on their circumstances.
If you are an unmarried couple then stamp duty will apply to the both of you as a unit.
This is because HMRC will view you as one due to the fact that you are both on the title deeds of the property.
This means the circumstance of one party directly affects the other.
If you are eligible for a first-time buyer stamp duty relief but the other party in the couple isn’t then you won’t be able to claim first-time buyer stamp duty relief.
If you own more than one residential property at the end of the transaction then the combined unit will have to pay stamp duty at a higher rate as the property you have both purchased is considered an additional property due to the unit already owning one residential property.
As you can see, whether you are a married couple or an unmarried couple stamp duty will still affect you in the same way as you are treated as a combined unit.
One of the instances, where an unmarried couple could avoid additional stamp duty rates if either party already owns a residential home is if the party who doesn’t own a residential home is simply residing in the home of the other party but does not own it.
The party who has no interest in the home in which they reside and are not married to the owner can go and buy residential property on their own and avoid the additional stamp duty rate and may be able to claim first-time buyer stamp duty relief if they are eligible.
Another question concerning stamp duty and unmarried couples could be below.
How does stamp duty affect unmarried couples who are separating?
Example: If you are an unmarried couple and you are separating from each other but one party wants to buy the other out.
The part who wants to buy the other party out already owns a residential property and hence the acquisition of any shares in another property worth over £40,000 will incur stamp duty charges at the additional rate of 3% on the whole purchase price.
In this case, we will consider what stamp duty exemptions could potentially be claimed for unmarried couples.
The Finance Act 2003, Schedule 3, Paragraph 3A provides an exemption from stamp duty charges when the transaction which the charge would have been applied to concerns the end of a marriage or civil partnership.
However, this stamp duty exemption does not provide any exemption for unmarried couples.
This means stamp duty at the additional rate will be due on the party who is acquiring the property as they already have an existing residential property and will, therefore, have more than one property at the end of the transaction.
In this instance, the only remedy would be for the party who is acquiring the shares to dispose of their initial property within 36 months of completing this transaction and claim a stamp duty refund.
That being said, seeking independent financial and legal advice is very important as there are some scenarios where stamp duty relief may still affect an unmarried couple.
Further amendments which were introduced with the Finance act 2018 allowed some segment of purchases to claim relief from the higher rate additional stamp duty charges of 3%.
The one which is of interest to us is the one which covers those purchasing properties which they are increasing their interest in and has been their main residence.
The amendments stated that with exception of a leasehold interest with less than 21 years to run or a joint interest of less than 25% of the shares in the property, any transactions after 22/11/17 will not have any additional rate stamp duty charge if:
- The purchaser had a prior interest in the purchased dwelling immediately before the date of the transaction, and
- The purchased dwelling had been the purchaser’s only or main residence throughout the period of three years ending with the date of the transaction.
This means if an unmarried couple is splitting and one of them is buying the other one out but already has an existing property they may not be liable for stamp duty at the additional rate if the property had been their main residence for the last three years.
They will still have to pay stamp duty at the standard rate.
What does HMRC say on married and unmarried couples?
“Married couples and civil partners
Married couples and civil partners who own one property at the end of the day of a transaction will not pay the higher rates of SDLT. However, if either of them owns more than one residential property they may pay the higher rates when purchasing another property.
The government will treat married couples and civil partners living together as one unit. This is consistent with other areas of the tax system including Capital Gains Tax private residence relief where married couples are entitled to relief on one residence between them.
This means that:
married couples and civil partners may own one main residence between them at any one time for the purposes of the higher rates
property owned by either partner (and any minor children) will be relevant when determining if an additional property is being purchased or not. Therefore, an individual buying a property may be liable for the higher rates if his or her spouse or civil partner has an existing residential property. If the spouse or civil partner then sells that residential property they may be able to claim a refund
Married couples and civil partners are treated as living together, and therefore as one unit, unless they are separated:
under a court order; or
by a formal Deed of Separation executed under seal.
In each case the marriage or civil partnership must have broken down. Where a married couple or civil partners sometimes live apart (but the relationship has not broken down), which property is the couple’s main residence will need to be determined by the facts (more detail is available in section 2.8).
Mr and Mrs I own a main residence together. They decide to purchase a second home jointly. At the end of the day of the transaction they own more than one residential property and are not replacing their main residence, so the higher rates will apply.
Mr and Mrs L own two residential properties jointly. Although they spend time in both, only one of these properties is their main residence. If they sell the residential property that is their main residence and purchase a new main residence, they will not pay the higher rates, as at the end of the day of the transaction they own two properties but are replacing their main residence.
However, if they sell the property that is not their main residence, their second home, and purchase another second home, they will pay the higher rates, as at the end of the day of the transaction they own two residential properties and have not replaced their main residence.
Mr and Mrs M are married. Mr M owns a home (which he purchased on his own before he was married) where the couple live as their main residence. Mrs M then buys a property to be rented out. At the end of the day of the transaction they own more than one residential property and are not replacing their main residence, so the higher rates will apply.
Mr A marries Mr B. They each own a property (which they purchased individually before they were married and used as their respective main homes). Mr B then sells his former main home and purchases a new property to rent out.
At the end of the day of the transaction Mr A and Mr B own more than one residential property and are not replacing their main residence, so the higher rates will apply.
Ms C and Ms D are in a civil partnership. Ms C owns a property (which she purchased on her own before her civil partnership) where they live together as their main residence. However, Ms C and Ms D decide to separate. After they have separated under a court order, Ms D decides to purchase a property.
At the end of the day of the transaction Ms D owns one residential property, so the higher rates will not apply.”
Stamp duty calculator
You can use this stamp duty calculator to work out what your stamp duty liability may be.
You should still seek independent financial and legal advice.
In this brief guide, we discussed Unmarried couple stamp duty and how unmarried couples can potentially reduce their stamp duty liability.
If you have any questions or comments please let us know.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.