Can a financial remedy order stop the higher rates of SDLT applying to a new purchase?

Introduction

People often search for this issue after a divorce or separation, where one former spouse remains on the title or mortgage of the old family home because of a court order. The question is whether that continuing connection means the higher rates of Stamp Duty Land Tax (SDLT) must be paid when buying a new home.

The answer depends on more than just whose name is on the Land Registry title or mortgage. In some cases, a former spouse still owns a chargeable interest in the old property. In other cases, a specific statutory exception means that interest is ignored for higher rates purposes.

Where there is a qualifying property adjustment order and the former spouse has moved out while the other former spouse remains in occupation, paragraph 9B of Schedule 4ZA to the Finance Act 2003 can disapply the higher rates test. That can make a major difference to the SDLT due on the new purchase.

The Question

A buyer in a long-term unmarried relationship wanted to purchase a home with their partner. The partner had previously divorced and, under a financial remedy order, remained on the title and mortgage of the former matrimonial home until the youngest child reached 18 or another specified event occurred.

The order also gave the partner a defined percentage share of the sale proceeds when the former home is eventually sold. The buyer wanted to know:

• whether the order could prevent the higher rates of SDLT from applying on the new purchase;
• whether it mattered that the couple were not married or in a civil partnership; and
• whether buying the new property in unequal shares would reduce the SDLT surcharge.

Nick’s Explanation

Nick first identified the right starting point: the key issue is not simply legal title, but whether the person still has a beneficial interest in the former home. If someone remains on the title or mortgage only as a formality, without any right to value, income or sale proceeds, there may be scope to argue that they no longer own an additional dwelling for SDLT purposes.

However, once it became clear that the former spouse still had a fixed share in the sale proceeds, Nick explained that this would normally amount to a beneficial interest in another dwelling.

After reviewing the financial remedy order itself, Nick then identified the more important point: a specific statutory exception can apply where the former spouse’s continuing interest arises under a qualifying property adjustment order. In anonymised form, his conclusion was:

The partner’s share in the former matrimonial home would usually matter for the higher rates rules, but paragraph 9B of Schedule 4ZA Finance Act 2003 can switch that interest off where there is a qualifying property adjustment order, the former spouse remains living in the home as their only or main residence, and the buyer no longer occupies it.

Nick also corrected a common misunderstanding about mixed ownership shares on the new purchase. If the higher rates applied at all, they would not simply apply to one buyer’s percentage share in the way many people assume. The higher rates rules for joint purchasers operate by reference to whether any one of the purchasers meets the conditions, subject to any statutory exception.

The Law

The higher rates of SDLT on additional dwellings are set out in Schedule 4ZA to the Finance Act 2003. Broadly, the surcharge applies where, at the effective date of the transaction, a purchaser is buying a major interest in a dwelling and already owns another major interest in a dwelling worth at least £40,000, unless a replacement of only or main residence or another statutory exception applies.

For these purposes, an undivided share in a dwelling can still count as a major interest. That is why even a minority share in a former home can potentially trigger the higher rates.

In divorce and separation cases, paragraph 9B of Schedule 4ZA is particularly important. It provides a special rule for certain purchasers who have an interest in a dwelling because of a property adjustment order made in connection with the breakdown of a marriage or civil partnership.

In broad terms, paragraph 9B can disregard the former matrimonial home when testing whether the purchaser owns another dwelling if:

• there is a qualifying property adjustment order;
• the order allows the former spouse or civil partner to occupy the dwelling as their only or main residence; and
• the purchaser no longer occupies that dwelling.

A property adjustment order may be made, for example, under section 24(1)(b) of the Matrimonial Causes Act 1973.

The fact that a person is unmarried to their new partner also matters. Unmarried cohabitants are generally treated separately for SDLT purposes. They are not automatically treated as one unit in the same way that spouses and civil partners can be in some SDLT contexts. But for a joint purchase, the higher rates rules still need to be considered carefully because the conditions are tested across the transaction and the purchasers.

Analysis

Step 1: Does the partner still have an interest in the former home?

Yes. A right to receive a defined percentage of the sale proceeds is a beneficial interest. On ordinary principles, that would usually mean the partner still owns a major interest in another dwelling for Schedule 4ZA purposes.

Step 2: Would that usually trigger the higher rates on a new purchase?

Ordinarily, yes. If a person buys a new dwelling while retaining a beneficial interest in another dwelling worth at least £40,000, the higher rates are potentially in point.

Step 3: Does the financial remedy order create a statutory exception?

Potentially, and in this scenario the answer appears to be yes. The order reviewed by Nick was said to be made under section 24(1)(b) of the Matrimonial Causes Act 1973. It allowed the former spouse to continue living in the former matrimonial home until a trigger event, while the buyer had moved out. That is the type of arrangement paragraph 9B is designed to address.

Step 4: What is the effect of paragraph 9B?

If paragraph 9B applies, the former matrimonial home is disregarded for the higher rates test. In practical terms, HMRC must treat the partner as not owning that other dwelling for this purpose on the date of the new purchase.

Step 5: What if the new property is bought jointly?

If paragraph 9B applies to disregard the partner’s former home interest, the joint purchase should not attract the higher rates merely because of that former matrimonial home. The surcharge would not be payable on the basis of that retained share.

Step 6: What if the new property is bought in unequal shares, such as 90/10?

That split does not create a special SDLT saving in itself. The key question is whether the higher rates apply to the transaction at all. If they do apply, they are not simply charged only on the minority owner’s slice in the way many buyers expect. If they do not apply because paragraph 9B removes the old home from the test, then the 90/10 split is irrelevant to the surcharge question.

Step 7: Could the position change later?

Yes. If the occupation arrangements under the order end, the child reaches the relevant age, the former spouse leaves permanently, or the order is varied or discharged, the paragraph 9B treatment may no longer be available for any later purchase. Each transaction must be tested at its own effective date.

Outcome

Where a divorced person still has a percentage share in the former matrimonial home, that would usually count as ownership of another dwelling for higher rates SDLT purposes. But if that interest is held under a qualifying property adjustment order and the former spouse remains living there as their only or main residence while the buyer has moved out, paragraph 9B of Schedule 4ZA Finance Act 2003 can disregard that interest.

On those facts, the higher rates of SDLT should not apply to the new purchase merely because of the retained share in the former matrimonial home.

Buying the new property in 90/10 shares does not create the answer. The real issue is whether paragraph 9B applies. If it does, the surcharge is not payable on that basis. If it does not, changing the ownership percentages will not solve the problem in the simple way many people assume.

Practical Steps

• Check the financial remedy order carefully to confirm the legal basis of the order, especially whether it is a qualifying property adjustment order.
• Confirm that the former spouse is entitled to occupy the former matrimonial home as their only or main residence under the order.
• Confirm that the buyer no longer occupies that property.
• Give the sealed court order to the conveyancing solicitor well before exchange.
• Ask the solicitor to review paragraph 9B of Schedule 4ZA Finance Act 2003 specifically, rather than looking only at legal title or mortgage liability.
• Ask the solicitor to record the SDLT position clearly in the return and, where appropriate, explain in the additional information box that the former home interest is disregarded under paragraph 9B.
• Recheck the position if there has been any later variation to the order or any change in occupation before completion.

If the issue instead concerns whether a property is uninhabitable or not suitable for use, readers should note that the condition thresholds are now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.

Conclusion

A financial remedy order does not automatically remove higher rates SDLT, but it can do so where paragraph 9B of Schedule 4ZA Finance Act 2003 applies. The crucial point is not simply that a former spouse remains on the title or mortgage. It is whether the retained interest falls within the statutory divorce-related exception. If it does, the former matrimonial home is ignored for the higher rates test on the new purchase.

Legal References Used

• Finance Act 2003, Schedule 4ZA
• Finance Act 2003, Schedule 4ZA, paragraph 2(5)
• Finance Act 2003, Schedule 4ZA, paragraph 9B
• Matrimonial Causes Act 1973, section 24(1)(b)
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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