Divorce, dissolution and stamp duty: the Schedule 3 exemption

When a marriage or civil partnership ends, the home usually has to move — one partner buys the other out, or the property is transferred as part of the financial settlement. On the face of it that is a land transaction, and land transactions can attract Stamp Duty Land Tax (SDLT). But a specific carve-out in the legislation means a transfer between the two parties, made in connection with the ending of the relationship, is exempt from charge: no SDLT, and no return to file.

That carve-out is paragraph 3 — and, for civil partners, paragraph 3A — of Schedule 3 to the Finance Act 2003. This guide sets out exactly what it covers, what it does not, and, using current 2026 rates, what the exemption is worth in cash.

This is general information, not advice. Speak to a qualified adviser before acting.

The finding, in one line

A £250,000 mortgage split down the middle in a court-ordered divorce settlement means one partner takes on roughly £125,000 of the other's debt. Taxed as an ordinary transfer, that £125,000 of chargeable consideration would cost £0 at the standard rate but up to £6,250 if the higher rate for additional properties applied — and would need a return either way. Under the Schedule 3 exemption, the SDLT is £0 and no return is due. (SDLT figures from the Homecost stamp duty calculator, checked 11 July 2026.)

What the exemption actually says

Schedule 3 lists the land transactions that are exempt from SDLT. Paragraph 3, headed "Transactions in connection with divorce etc", provides that:

"A transaction between one party to a marriage and the other is exempt from charge if it is effected … in pursuance of an order of a court made on granting … their divorce, the annulment of the marriage or their judicial separation."

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— Finance Act 2003, Schedule 3, paragraph 3

It reaches wider than a court order. Paragraph 3(d) also exempts a transfer made "in pursuance of an agreement of the parties made in contemplation or otherwise in connection with" the divorce, annulment, judicial separation or a separation order. So a transfer effected under a formal separation agreement can qualify even where a court has not yet made an order.

Paragraph 3A applies the same treatment to civil partners: a transaction between the two parties to a civil partnership, made in connection with its dissolution, annulment or their judicial separation, is exempt from charge. It was added by the Civil Partnership Act 2004 and has applied since December 2005.

Why an ordinary transfer would be taxed

On a "transfer of equity" the chargeable consideration is not the value of the house — it is what the person taking over actually gives for the share they receive. In practice that is usually the outstanding mortgage debt they take on, plus any cash equalisation payment. If a couple owns a home 50/50 with £250,000 left on the mortgage, the partner keeping the house takes on the other's £125,000 share, so £125,000 is the chargeable consideration. The underlying mechanics are set out in our guide to transfer of equity and stamp duty.

Without the exemption, that consideration is taxed on the normal SDLT ladder — and if the person receiving the share already owns another property, the 5% additional-property surcharge can apply to the whole amount:

Source: Homecost stamp duty calculator, England & Northern Ireland 2026 rates, checked 11 July 2026. Whether the surcharge applies depends on the recipient's own circumstances — see the 5% additional-property surcharge explained.

Where paragraph 3 or 3A applies, the figure in every row becomes £0.

Three conditions that have to be met

The exemption is precise. All three of the following have to hold:

1. The transfer is between the two parties themselves — one spouse or civil partner to the other. A transfer to a third party (a new partner, a parent, an adult child) falls outside paragraph 3 and 3A.
2. It is connected to the ending of the relationship — divorce, dissolution, annulment, judicial separation or a separation order.
3. It is made under a court order or a qualifying agreement — a court order in the matrimonial or dissolution proceedings, an order under the relevant provisions of the Matrimonial Causes Act 1973 or the Family Law (Scotland) Act 1985, or an agreement of the parties made in connection with the separation.

Miss any one of them and the transaction falls back onto the normal rules.

Where it does not apply

The most common trap is an informal split. A couple who separate without a court order and without a written agreement, where one simply assumes more of the mortgage, do not automatically get the exemption — the transfer has to be made in pursuance of an order or agreement connected to the separation. Married couples and civil partners are also subject to separate rules that decide whether the additional-property surcharge bites while they are still treated as one unit for SDLT; those are covered in separated spouses and the SDLT surcharge and the paragraph 9 separation evidence checklist.

The return, not just the tax

There is a second benefit that is easy to miss. A Schedule 3 exempt transaction is not notifiable — because it is exempt, no SDLT return has to be filed at all. That matters because the reporting floor is low: an ordinary transfer of a "major interest" in land has to be reported to HMRC once the chargeable consideration reaches £40,000, even where the tax works out at £0 (Finance Act 2003, section 77A). A £125,000 buyout at the standard rate produces no tax but would still need a return; the same buyout inside the exemption needs neither. The filing side of this is covered in the £40,000 stamp duty return trap.

How often the numbers land in the taxable band

Homecost holds every residential sale registered by HM Land Registry. In 2025, 763,112 homes changed hands in England and Wales at a median price of £295,000 (Land Registry Price Paid, category-A sales, checked 11 July 2026). Of those, about 6.9% sold below £125,000 and 30.9% between £125,000 and £250,000. A half-share buyout on a median home therefore commonly puts the chargeable consideration squarely in the band where — if the exemption did not apply and the surcharge did — the bill would run to several thousand pounds. The exemption is what keeps it at zero.

The three UK regimes handle this in parallel: Scotland's Land and Buildings Transaction Tax (LBTT) and Wales's Land Transaction Tax (LTT) each have their own equivalent exemptions for transfers on divorce and dissolution. See SDLT vs LBTT vs LTT compared for how the three systems line up.

See the numbers for a specific property

You can model the underlying cost of a specific home on Homecost — search a postcode such as M1 1AE in Manchester to see recent sale prices and the all-in monthly cost, or run a figure through the stamp duty calculator. For how these pieces fit together, browse the Cost Intelligence guides, and see the full guide library for the data behind them.

Whether a particular transfer qualifies for the Schedule 3 exemption depends on the exact terms of the order or agreement and on each person's property position. This is general information, not tax or legal advice. Speak to a qualified adviser — a conveyancer or solicitor — before acting.