LTT Higher Rates Exclusion for Property Interests After Divorce or Civil Partnership Dissolution

LTT higher rates: retained interests after divorce or civil partnership dissolution

A person buying a new home in Wales may be able to ignore their retained share in a former family home when checking whether higher residential rates of Land Transaction Tax apply. This only applies in a limited situation where the retained interest exists because a qualifying court order made on divorce, dissolution, or related proceedings requires the person to keep that share.

• The rule is designed to stop higher LTT rates applying just because someone is forced by a court order to remain a co-owner of a former home.
• For the exclusion to apply, the buyer must hold the retained interest as a tenant in common with a former spouse or former civil partner, and the order must be in force before the new purchase completes.
• The retained dwelling must not be the buyer’s only or main residence, and the order must be made under one of the specified statutory provisions.
• Separation on its own is not enough, and informal arrangements do not qualify unless they are included in a qualifying court order.
• A consent order can count if it makes the relevant property adjustment under one of the listed legal provisions.
• If the court order is made only after the new property has been bought, any higher rates already paid cannot be reclaimed on this ground.

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LTT higher rates: interests retained after divorce or civil partnership dissolution

This page explains a narrow but important exception to the higher residential rates of Land Transaction Tax in Wales. It applies where a person still has a share in a former family home because a court order requires that interest to be kept after divorce, dissolution, or certain related proceedings. If the conditions are met, that retained interest is ignored when deciding whether the person owns another dwelling for higher rates purposes.

What this rule is about

The higher rates for residential LTT depend in part on whether the buyer owns, or is treated as owning, interests in other dwellings at the effective date of the new purchase. That can create a problem after a relationship breakdown. A person may have moved out and be buying a new home, but still legally hold a share in the former home because the court has ordered that the property position must stay as it is for a period.

Without a specific rule, that retained share could make the new purchase look like the acquisition of an additional dwelling, even where the buyer has no real choice about continuing to hold the old interest.

The rule in paragraph 26 of Schedule 5 provides an exclusion for certain retained interests. Its purpose is to prevent the higher rates applying simply because a former spouse or civil partner is compelled by a qualifying court order to remain a co-owner of a former home.

What the official source says

The official material says that, for individuals, a retained interest in a dwelling can be left out of account when applying the higher rates if all of the following are true:

• the buyer retains the interest as a tenant in common with their former spouse or former civil partner;
• the retained interest exists because of an order under one of the listed statutory provisions;
• the relevant order is already in place before the purchase of the new dwelling; and
• the dwelling in which the interest is retained is not the buyer’s only or main residence.

The listed provisions are:

• section 24(1)(b) of the Matrimonial Causes Act 1973;
• section 17(1)(a)(ii) of the Matrimonial and Family Proceedings Act 1984;
• paragraph 7(1)(b) of Schedule 5 to the Civil Partnership Act 2004; and
• paragraph 9 of Schedule 7 to the Civil Partnership Act 2004.

The source also makes four practical points:

• mere separation is not enough;
• the exclusion only applies if the interest is retained because of one of those court orders;
• a consent order that makes a property adjustment under one of those provisions counts as an order under that provision; and
• if the court order is made only after the new property has already been bought, there is no repayment of any higher rates tax paid on that earlier purchase.

What this means in practice

If you are buying a new home after divorce or dissolution, you do not automatically escape the higher rates just because you have separated or because the old home is tied up in family proceedings. The key question is why you still hold the old interest.

If you still own part of the former home only because a qualifying court order requires that position to continue, that interest may be ignored. If it is ignored, it should not count as another dwelling when deciding whether the higher rates apply to your new purchase.

This matters most where you cannot use the ordinary replacement of main residence rules. For example, you may have left the former home but not disposed of your interest in it. In that situation, absent this special rule, the retained share could trigger higher rates on the purchase of your new home.

The exception is therefore a targeted relief from an unfair result. It does not remove higher rates in every case involving relationship breakdown. It only deals with a retained interest that exists because of a qualifying order.

How to analyse it

A sensible way to approach this issue is to work through the following questions:

• Are you an individual buying a dwelling that would otherwise be tested under the higher rates rules?
• Do you still hold an interest in another dwelling?
• Is that other dwelling held with your former spouse or former civil partner as tenants in common?
• Is the reason you still hold that interest a court order made under one of the four listed statutory provisions?
• Was that order in force before the purchase of the new dwelling?
• Is the retained dwelling something other than your only or main residence?

If the answer to those points is yes, the retained interest is capable of being ignored for higher rates purposes.

If any of those points is missing, the exclusion may not apply. In particular:

• separation by itself does not qualify;
• informal arrangements do not qualify unless embodied in a qualifying court order;
• timing matters, because the order must exist before the new purchase; and
• the rule is about the retained interest in the former dwelling, not a general exemption from higher rates.

Example

Suppose a husband and wife separate. The court makes an order under section 24(1)(b) of the Matrimonial Causes Act 1973 requiring the husband to keep his share in the former matrimonial home until their youngest child reaches 21 or finishes tertiary education. He then buys a new home for himself.

Ordinarily, his continuing share in the former home could mean he is treated as owning another dwelling, which may bring the higher rates into play. But if that retained share exists because of the qualifying court order, the share in the former home is ignored for this purpose. His new purchase is therefore analysed without counting that retained interest.

This is the example given in substance by the official material. It shows why the rule exists: the buyer is not choosing to keep the old interest and would otherwise be penalised for complying with the court order.

Why this can be difficult in practice

The main difficulty is that relationship breakdown often involves a period of informal separation, negotiation, and interim arrangements before any final order is made. The tax result depends heavily on the legal basis on which the old interest is being retained at the moment the new purchase completes.

Three points commonly need careful checking:

• Whether the order is actually made under one of the listed statutory provisions, rather than under some other mechanism.
• Whether the ownership structure and terms of the order fit the rule described in the guidance, including retention as a tenant in common with a former spouse or civil partner.
• Whether the order was already in place before the effective date of the new purchase.

The timing point is especially strict in the official material. If the buyer pays higher rates on the purchase and only later obtains a qualifying order, the guidance says there is no repayment on that basis.

Another practical issue is interaction with the replacement of main residence rules. The source material explains this exception separately, because a person may fail the replacement rules yet still benefit from this specific exclusion. The two issues should not be confused.

Key takeaways

• A retained share in a former home can be ignored for LTT higher rates purposes, but only in a narrow class of divorce or dissolution cases.
• Separation alone is not enough; the retained interest must exist because of a qualifying court order, and that order must be in place before the new purchase.
• A consent order can qualify if it makes the relevant property adjustment under one of the listed statutory provisions.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: LTT Higher Rates Exclusion for Property Interests After Divorce or Civil Partnership Dissolution

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