Cohabitation breakdown: What are the tax implications if you own your home?
Sad but true, not to mention unfair, splitting up when you live together is often more complicated and costly than it is if you are married.
This is why Wards Solicitors, who witness this inequality on a daily basis, is continuing to press for urgent cohabitation legal reform alongside family law firms up and down the country.
In the meantime, though, it is best to be fully informed about the tax implications you may face as a separating unmarried couple and specialist legal advice can be a major advantage here.
Splitting up with a property: what do you need to consider?
Often, when cohabiting couples decide to separate, they focus on one person buying the other out or selling the property altogether.
What sometimes gets overlooked is the possibility that Stamp Duty Land Tax and/or Capital Gains Tax may apply.
What are the Stamp Duty implications in cohabiting breakdown?
Stamp Duty (SDLT) is a tax you pay when buying a property or a piece of land and may be applicable if a property is going to be transferred from joint names to one person’s name, as if often the case when a cohabiting relationship ends.
The person acquiring a share of the property may be liable to pay SDLT on any transfer including:
- Any cash payment.
- Any outstanding mortgage.
The current SDLT threshold is £250,000, doubled by Liz Truss in her September 2022 mini-budget.
It is important to consider any SDLT cost you might be liable for as early as possible and consider it when working out your separation agreement.
In contrast, separating married couples are exempt from Stamp Duty as long as any transfers made are in accordance with a court order or written agreement in connection to, or contemplation of, a court order.
What are the Capital Gains Tax implications for cohabiting breakdown?
Unlike married couples, transfers of assets between unmarried couples during their relationship, and if they separate, are considered chargeable transfers for Capital Gains Tax (CGT).
The tax, which can apply when a property is sold or transferred, is charged on any gain that it has realised. So, if your property has gone up in value, as is so often the case, CGT could apply.
Whilst CGT is usually only chargeable on a second home and not your main residence, it is always best to seek advice from a tax advisor.
CGT will also apply if you own two properties, lived in one and rented the other out for example, and payable on any gain made on the sale of the rented property.
Get in touch
Wards Solicitors wins high praise in the 2025 edition of the independent Legal 500 guide of outstanding legal professionals for its exceptional professional service standards and high levels of technical expertise.
It has also recently been named as Regional Law Firm of the Year by Bristol Law Society.
Our specialist Cohabitation and Dispute solicitors, Chloe King and Rebecca Max, can assist in disputes concerning the ownership of property, whether registered in joint names or one person’s sole name.
This includes unmarried couples, family members and friends who may find themselves in a difficult situation if one person wishes to sell the property or move out.
Contact them to arrange a free 30 minute, no obligation initial consultation.
Email: chloe.king@wards.uk.com Phone: 0117 929 2811
Email: rebecca.max@wards.uk.com Phone: 01454 204880