If you are separating don’t get caught out by the New Stamp Duty Changes
Your Family Law Experts Newcastle and Sunderland.
Since 1 April 2016 if you purchase a second property that is not replacing your main residence then you are extremely likely to be liable for the new 3% stamp duty uplift; the table below details how this is tiered in line with the property price:
|Stamp Duty Band||Existing Residential Stamp Duty Land Tax Rates||New Additional Residential Stamp Duty Land Tax Rages|
|£0 - £125k||0%||3%|
|£125k - £250k||2%||5%|
|£250k - £925k||5%||8%|
|£925k - £1.5m||10%||13%|
The new stamp duty rules could affect the ability for many newly married couples and registered civil partners to purchase their first home together. The issue arises where one partner already owns a property. This is because under the new rules, married couples and registered civil partners are treated as one buyer. In essence, ownership of an existing home by one partner will affect the purchase of the couple’s first home together. Equally should either individual purchase another property in their own right, they may be liable for the new additional rates. If the party however then sells that property, they could then claim for a refund on the additional tax paid.
If a couple owned a property jointly and then decide to separate or divorce and either party then purchases a new home to live in, but their name is still on the deeds of their previous home (which is NOT being sold), this will constitute as buying an additional property which means the 3% additional rate will initially apply. However, if they go onto sell their share of the home back to their former partner within 36 months of completing on the new house purchase, HMRC will provide a full refund.
Married couples and civil partners who separate in circumstances that are likely to be permanent will not have to pay the higher rates of Stamp Duty (a surcharge of 3% above the current rates) when one of them buys a new home before the family home has been sold/transferred. In this instance, there must either be a separation agreement; Court Order or a permanent desire to separate.
Each case will be fact-specific and the key issue will be whether the couple are separated in circumstances that are likely to be permanent. If they have not yet separated permanently, the 3% surcharge may have to be paid initially, but may then be reclaimed within three years if the separation/divorce becomes permanent.
This is all about getting the order of things right and as such it is essential that separating couples get swift legal advice to formalise their separation before they rush into buying or they could end up paying stamp duty that need not apply to them. This could be costly. If we take the average house price in the north east of £154k this could equate to an additional £4,650 on purchase of a new home plus additional duty on the transfer of the former marital home.
If you have a question regarding jointly owned property or any aspect of family law, fill out our form below and one of our friendly Family Law team will be in touch.
If you think that this applies to you then contact us for to arrange a ‘Next Steps’ Divorce Advice Session.
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