Do you pay SDLT on a transfer of equity during divorce before the consent order is sealed?

Introduction

People often search for this issue when a family home is being transferred between separating spouses and the timing does not neatly match the court timetable. A common concern is whether Stamp Duty Land Tax (SDLT) is payable if one spouse buys out the other before the consent order has been approved by the court.

The key point is that the SDLT rules contain a specific exemption for certain transfers made because of divorce, annulment, judicial separation or the dissolution of a civil partnership. The question is whether that exemption only applies once there is a sealed court order, or whether a written agreement connected with the divorce can be enough.

The Question

A divorcing couple have agreed how to divide their finances. One spouse is taking over the family home and paying the other for their share. A draft consent order has been prepared and is due to be submitted to the court, but it is unlikely to be approved before the property transfer needs to complete. A conveyancer has suggested SDLT may be payable because there is not yet a sealed court order. The issue is whether the transfer can still qualify for the divorce exemption where there is already a clear written agreement and the transfer forms part of the overall divorce settlement.

Nick’s Explanation

Nick’s view was that the exemption should apply on those facts.

He explained that SDLT normally applies when a person acquires a chargeable interest in land for consideration, including where one spouse takes over the other spouse’s share in the home. However, he pointed to the specific exemption in Schedule 3, paragraph 3 of the Finance Act 2003.

In anonymised form, his reasoning was:

• There is an exemption for transfers between spouses or civil partners in connection with divorce or judicial separation.
• The exemption can apply not only where the transfer is made under a court order, but also where it is made under a written agreement in contemplation of, or in connection with, such a court order.
• If the parties have a clear written agreement confirming the financial arrangements, and the transfer of equity is plainly part of the divorce settlement, that should satisfy the statutory test.
• A sealed consent order is the simplest evidence, but it is not the only possible evidence.

Nick also noted that the transaction documents should clearly link the transfer to the divorce and the agreed financial settlement, so that the basis of the exemption is clear if HMRC ever asks questions.

The Law

SDLT is charged under Part 4 of the Finance Act 2003. Section 43 provides that SDLT applies to the acquisition of a chargeable interest. In a normal transfer of equity, chargeable consideration may include money paid for the outgoing owner’s share and, in some cases, debt taken on by the incoming owner.

But Schedule 3 to the Finance Act 2003 sets out transactions that are exempt from charge. The relevant provision here is Schedule 3, paragraph 3.

In broad terms, Schedule 3, paragraph 3 exempts a land transaction where:

• the parties are or have been spouses or civil partners; and
• the transaction is effected in pursuance of or in connection with certain matrimonial or civil partnership events.

That includes transfers made:

• under an order of the court made in connection with divorce, nullity, judicial separation, dissolution or annulment; or
• under an agreement between the parties made in contemplation of or in connection with such an order.

This is why HMRC guidance states that SDLT is not payable if property is transferred between spouses or civil partners as part of an agreement or court order because they are divorcing or dissolving a civil partnership.

Analysis

The practical analysis usually works like this.

1. First, ask whether there is a land transaction that would normally be chargeable. A transfer of one spouse’s share in the home to the other spouse usually is a land transaction, and SDLT would ordinarily be considered if there is chargeable consideration.

2. Second, ask whether the parties fall within the matrimonial exemption rules. If they are spouses who are divorcing, this part is usually straightforward.

3. Third, ask what legal basis the transfer is being made under. The exemption does not require a sealed court order in every case. It can also apply where there is a written agreement made in contemplation of or in connection with such an order.

4. Fourth, examine the evidence. The stronger the documentary link between the transfer and the divorce settlement, the better. Useful evidence may include a signed written agreement, a draft consent order, correspondence showing the agreed financial terms, and transfer documents that expressly refer to the divorce settlement.

5. Fifth, consider whether the transfer is truly part of the divorce arrangements, rather than an unrelated property deal between spouses. The exemption is aimed at matrimonial settlements, not ordinary commercial dealings.

On the scenario described, the important facts are that:

• the parties are in the divorce process;
• they have already reached written financial agreement;
• a draft consent order has been prepared for court submission; and
• the transfer of equity is part of the agreed division of assets.

Those facts strongly support the view that the transfer is being made under a written agreement in contemplation of, or in connection with, a court order relating to the divorce.

That is why a conveyancer’s suggestion that SDLT must automatically be paid unless and until the consent order has been sealed is too narrow. A sealed order is good evidence, but the legislation is wider than that.

There is a separate point for the spouse buying another property. If that purchase completes while that spouse still owns an interest in the former matrimonial home, the higher rates for additional dwellings may need to be considered on that separate purchase, depending on the exact facts and timing. That is a different SDLT issue from the transfer of equity itself.

For completeness, where readers are dealing with a different SDLT question about whether a property was uninhabitable or not suitable for use as a dwelling, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. That authority does not govern the divorce exemption, but it is relevant to many residential SDLT disputes.

Outcome

Where one spouse takes over the other’s share of the home as part of an agreed divorce settlement, SDLT should not normally be payable if the transfer is made under:

• a court order, or
• a clear written agreement made in contemplation of or in connection with such a court order.

So, if there is already a genuine written financial agreement and the transfer is clearly part of the divorce arrangements, the absence of a sealed consent order at the date of completion does not necessarily prevent the exemption from applying.

Practical Steps

• Check that the agreement between the spouses is in writing and clearly records the financial settlement.
• Make sure the transfer of equity documentation refers to the divorce and the agreed settlement.
• Keep copies of the draft consent order, any signed agreement, and relevant solicitor correspondence.
• Ask the conveyancer to review Schedule 3, paragraph 3 of the Finance Act 2003 rather than relying only on general SDLT practice.
• If one spouse is also buying another property, review the higher rates rules separately, because that is a different SDLT question.
• If there is any uncertainty about the drafting or evidence trail, have the documents checked before completion.

Conclusion

A transfer of equity between divorcing spouses can be exempt from SDLT even before the consent order is sealed, provided the transfer is made under a written agreement connected with the divorce and in contemplation of, or in connection with, the court order. The essential point is not just timing, but whether the documents clearly show that the transfer forms part of the matrimonial settlement.

Legal References Used

• Finance Act 2003, section 43
• Finance Act 2003, Schedule 3, paragraph 3
• HMRC guidance: Stamp Duty Land Tax: transfer ownership of land or property
• 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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