‘Cancelling my wedding will cost me £59k in stamp duty’

Engaged couples who have lost thousands on cancelled weddings during the pandemic could be in for another financial blow due to knotty tax rules that result in unmarried partners who buy a house being penalised.

Weddings are not generally permitted in England during the current lockdown.

This could prove very costly for couples who are rushing to move home before the stamp duty holiday ends on March 31 – adding to calls from campaigners that the tax cut should be extended in light of the exceptional circumstances.

Samantha Dell, whose name has been changed, was due to get married in September 2020 but has twice had to cancel because of lockdown restrictions.

The 33-year-old owns a flat, bought before she met her fiancé, but cannot sell it because the building has dangerous Grenfell-style cladding.

Miss Dell has been forced to rent out the property. She now lives in her fiancé’s house, which they plan to sell so they can buy a new home together. However, purchasing a property without getting married or selling her flat will increase the couple’s tax bill dramatically.

“If we were married, we wouldn’t have to pay the higher rates of stamp duty charged on second homes. But sadly we can’t be yet and have to pay the surcharge,” Miss Dell said.

Normally, buyers have to pay an extra three percentage points in stamp duty when purchasing a second home, as is the case with Miss Dell. Owners of multiple properties do not pay if replacing their main residence.

However, couples who own two homes and replace one by buying a new property can be exempt provided that they are married or in a civil partnership and neither has any claim to the other’s property.

They must have both been living in the same property, which HM Revenue and Customs considers to be their main residence, and replace this with the new home. As a result of the cancelled wedding, Miss Dell and her partner, who are planning to buy a £1m house near Woking, will have to pay £58,750 in stamp duty rather than £28,750 if they were married. This assumes the transaction completes before the end of the stamp duty holiday in March.

“The wedding cancellations have become a bit of a comedy of errors. I wouldn’t complain except that it is going to cost me a lot of money,” Miss Dell added. She is now five months pregnant and desperate to move to a bigger home.

“I’m not worried about getting married with an audience – we would happily get married just the two of us – but we can’t even do that,” she said.

In England, weddings can only take place under exceptional circumstances, for example if one of the couple is seriously ill. In Scotland, Wales and Northern Ireland, ceremonies can still take place with restricted numbers.

The couple are not able to delay their house purchase until restrictions ease, as the person they are buying from is insistent on completing before the stamp duty holiday ends on March 31.

This newspaper is campaigning for the tax break to be extended so that buyers are not penalised because of circumstances outside their control.

To qualify for the marriage relief, spouses must pass certain tests from HMRC to check whether the property being sold is their main residence. These include the address that their bills are sent to and where they are registered to vote.

Ian Nance of Primary Financial Solutions, which is part of wealth manager Quilter, said: “Miss Dell could claim back the extra stamp duty if she managed to sell the flat within three years of buying the joint property.”

However, it must have been her residence at some point in the three years prior to buying the new property to qualify.

Rebecca Fisher, of law firm RussellCooke, said: “Miss Dell’s fiancé could purchase the new property in his sole name and then gift half of it to her in due course. If they have already paid off the mortgage by this point, there should be no stamp duty charge. If there is still a loan attached to the property, you have to pay stamp duty on the value of the mortgage being transferred.”

For example, if Miss Dell’s fiancé wanted to gift her half the property and there was still £500,000 to repay on the mortgage, she would pay stamp duty on £250,000.

Couples doing this should be careful, as HMRC will look dimly on them if it is clear the gifting was pre-planned to avoid tax. The buyer should clearly be the full and sole owner of the property when it is first purchased.

HMRC said it would deal with exceptional circumstance claims on a case-by-case basis.

‘If we were married we wouldn’t have to pay the extra stamp duty. But sadly we can’t be yet’

This couple want to make the most of the temporary stamp duty break