Divorce & Stamp Duty: Complete Guide to Property Transfer SDLT Exemptions
Understand when property transfers between spouses or civil partners during divorce are exempt from stamp duty, and when SDLT, LBTT or LTT may apply.
In this article
Overview of SDLT Exemption on Divorce
When a marriage or civil partnership ends, property often needs to be transferred from joint ownership to sole ownership, or from one party to the other. Under normal circumstances, such a transfer would trigger Stamp Duty Land Tax (SDLT) liability.
However, property transfers made pursuant to a court order in connection with divorce or dissolution of a civil partnership are exempt from SDLT. This exemption exists to prevent couples from being penalised by tax charges when dividing assets as part of matrimonial proceedings.
Key Principle
The exemption applies regardless of whether money or other consideration changes hands as part of the settlement. Even if one spouse pays the other a cash sum as part of the property transfer, no SDLT is due—provided the transfer is executed under a valid court order.
This relief is automatic and does not require a formal claim, but it is critical that the transfer is documented correctly and executed pursuant to the court order. Without proper legal documentation, HMRC may challenge the exemption.
Court Order Requirement
The stamp duty exemption is only available when the property transfer is made under a court order. The court order must be issued in connection with divorce, dissolution, or judicial separation proceedings.
What Qualifies as a Court Order?
- •Consent Order: An agreement between the parties approved and sealed by the court
- •Financial Remedy Order: A court-imposed order determining financial settlement
- •Property Adjustment Order: Specifically directs property to be transferred
- •Clean Break Order: Terminates all financial ties and includes property transfer
- •Separation Order: Made in judicial separation proceedings
Critical Requirement
A simple agreement between spouses—even if drafted by solicitors—does NOT qualify. The order must be issued by a court with jurisdiction over matrimonial proceedings. Without this, the full SDLT liability will arise.
The court order should explicitly reference the property to be transferred and the parties involved. When submitting an SDLT return (if required for other reasons), the court order reference should be noted to ensure the exemption is correctly applied.
Types of Matrimonial Court Orders
Different types of court orders can facilitate property transfers during divorce proceedings. Understanding which order applies to your situation is essential for ensuring the SDLT exemption is correctly claimed.
Consent Order
The most common mechanism. Both parties agree on the financial settlement, including property division. The agreement is drafted by solicitors and submitted to the court for approval. Once sealed by the court, it becomes a legally binding order. Property transfers pursuant to a consent order are exempt from SDLT.
Clean Break Order
A clean break order severs all financial ties between the parties, meaning neither party can make future claims against the other. Property transfers are often part of clean break settlements. The SDLT exemption applies to property transfers made under a clean break order.
Matrimonial Property Adjustment Order
This is a court order that specifically directs the transfer or sale of property as part of the divorce settlement. It may order one party to transfer their interest in the matrimonial home to the other, or direct the sale of property and division of proceeds. Transfers under this order are SDLT-exempt.
Separation Order
In cases of judicial separation (rather than full divorce), property transfers made under a separation order also qualify for SDLT exemption. The same principles apply: the order must be issued by a court with jurisdiction over matrimonial proceedings.
Professional Tip: Always ensure the court order is drafted to explicitly include the property transfer provision. Vague or incomplete orders may not satisfy HMRC requirements for the exemption.
When SDLT IS Payable
While the exemption is generous, there are specific circumstances where SDLT becomes payable on property transfers between divorcing spouses:
1. No Court Order
If the property transfer is made by simple agreement between the parties—without a court order—normal SDLT rules apply. The transfer is treated as a standard land transaction. If the property value exceeds the relevant SDLT threshold, duty is payable.
2. Consideration Beyond the Settlement
The exemption covers consideration given as part of the matrimonial settlement. However, if additional consideration (money or debt assumption) is paid outside the court-ordered settlement, that additional amount may be subject to SDLT. This is rare but can arise in complex financial arrangements.
3. Transfer Not Pursuant to the Order
If the property transfer occurs before the court order is issued, or is not executed in accordance with the order, SDLT may apply. Timing is critical: the transfer must occur after the order is sealed and must comply with its terms.
4. Subsequent Sale or Transfer
If, after the divorce settlement, the property is sold to a third party or transferred to a new partner, normal SDLT rules apply to that transaction. The exemption only covers transfers between the divorcing spouses pursuant to the court order.
Common Mistake
Couples sometimes transfer property informally before obtaining a court order, believing they can apply for the order retrospectively. This does NOT work. The order must exist before the transfer is executed, or SDLT will be due.
Separation vs Divorce
It is important to distinguish between informal separation and formal legal proceedings.
Informal Separation
If a couple separates informally (living apart but not pursuing legal proceedings), any property transfer between them is treated as a standard transaction. No stamp duty exemption applies. If one spouse transfers their share of a property to the other during informal separation, SDLT is calculated on the property value or consideration paid.
Judicial Separation
Judicial separation is a formal court process that results in a separation order. Property transfers made pursuant to a judicial separation order qualify for the SDLT exemption, just as they do in divorce proceedings. The couple remains legally married but lives separately under the terms of the court order.
Divorce Proceedings
Once divorce proceedings are underway and a court order (consent order, financial remedy order, etc.) is obtained, property transfers pursuant to that order are exempt from SDLT. The exemption applies from the date of decree nisi through to finalisation (decree absolute).
Practical Guidance: If you are separating and plan to transfer property, it is strongly advisable to initiate formal legal proceedings and obtain a court order before executing the transfer. This ensures the SDLT exemption applies and avoids unexpected tax liabilities.
Beneficial Ownership Transfers
In some cases, the legal title to a property may already be in the name of one spouse, but both spouses have a beneficial interest (equitable ownership). During divorce, the beneficial interest may need to be transferred or extinguished.
What is Beneficial Ownership?
Beneficial ownership refers to the equitable interest in a property, as opposed to the legal title. For example, the matrimonial home may be in the husband's name alone, but both spouses have contributed to the purchase and have a beneficial interest. On divorce, the wife may relinquish her beneficial interest in exchange for other assets.
SDLT and Beneficial Interest Transfers
Where a beneficial interest is transferred pursuant to a divorce court order, the same SDLT exemption applies. HMRC treats transfers of beneficial interests as land transactions for SDLT purposes, but the matrimonial exemption covers them provided the transfer is made under a court order.
Declaration of Trust
In some cases, a declaration of trust may be executed to formalise the beneficial ownership position before or during divorce proceedings. If the transfer of beneficial interest occurs pursuant to a court order, the SDLT exemption applies. If it occurs outside of court proceedings, normal SDLT rules apply.
Complex Scenarios
Beneficial interest transfers can be legally complex. Seek specialist legal and tax advice to ensure the transfer is correctly documented and the SDLT exemption properly claimed.
Scotland and Wales Equivalents
While this guide focuses on SDLT in England and Northern Ireland, Scotland and Wales operate their own property transaction taxes with equivalent divorce exemptions.
Scotland: Land and Buildings Transaction Tax (LBTT)
Scotland replaced SDLT with LBTT in April 2015. LBTT includes a relief for property transfers made pursuant to a court order in connection with divorce or dissolution of a civil partnership. The principles are identical to SDLT: the transfer must be made under a court order issued in matrimonial proceedings.
Revenue Scotland administers LBTT, and the exemption is automatic provided the transaction meets the criteria. Documentation should reference the court order and the nature of the transfer.
Wales: Land Transaction Tax (LTT)
Wales introduced LTT in April 2018, replacing SDLT for Welsh property transactions. LTT includes a relief for transfers made pursuant to a court order in divorce or dissolution proceedings. The Welsh Revenue Authority (WRA) administers LTT, and the same court order requirements apply.
Cross-Border Transactions: If you own property in multiple jurisdictions (e.g., England and Scotland), ensure each transfer is correctly documented under the relevant court order and tax regime. The exemption applies in all three jurisdictions, but procedural requirements differ slightly.
Common Questions
Do we need to notify HMRC about the transfer?
If the transfer is exempt from SDLT because it is made under a court order, you may still need to submit an SDLT return to claim the relief formally. However, no SDLT is payable. Check with your solicitor whether a return is required in your specific case.
What if we agree the settlement before the court order is issued?
It is common for parties to agree terms before submitting the consent order to court. However, the actual property transfer should not be executed until after the court order is sealed. Premature transfers may not qualify for the exemption.
Can I claim the exemption if I transfer property years after the divorce?
The exemption applies to transfers made pursuant to a court order, regardless of how long ago the divorce occurred. However, the transfer must be explicitly required or permitted by the court order. If the order was finalised years ago and did not include provision for the transfer, the exemption may not apply.
Does the exemption apply if we remarry later?
The exemption applies to transfers made during divorce proceedings under a court order. If you remarry the same person later and transfer property again, that subsequent transfer would be subject to normal SDLT rules (though spouses can transfer property between themselves without SDLT in ongoing marriages).
What happens if we transfer property to a third party as part of the settlement?
If the court order directs that property be sold to a third party and proceeds divided, the sale to the third party is a standard land transaction. The third party buyer pays SDLT on the purchase price according to normal rules. The division of proceeds between the divorcing spouses does not trigger SDLT.
Emma Richardson, MRICS
Chartered Surveyor & Property Tax Specialist
Emma Richardson is a RICS-qualified Chartered Surveyor with over 12 years of experience in UK property taxation. She founded Stamp Duty Calculator to help buyers understand the complex world of property transaction taxes.