Coming out of the pandemic it is a relief to many of those who were hoping to get married in the last year that perhaps they are finally able to do so. As one of the last industries to be released by the government, the appearance that somehow this area wasn’t as important as others lingers in our thoughts. But this isn’t the first time (and unlikely to be the last) the state has sought to intervene in peoples’ private lives.
It would seem that the marital status of an individual would have significant implications on the tax front and should play an important part of the financial planning and consideration, as would be given to compiling the guest list, venue and honeymoon. Something as important as where you should live and whether you should buy a marital home or indeed whether you should live together or have a second property as a holiday home should be part of the family planning and how you are treated for SDLT purposes will come to shape married life as never before. A great amount of consideration on how being married affects your buying power means that you should pay close attention to how the government sees the institution of marriage.
Are you better off or likely to pay more tax simply by being part of the married unit as it is often held out? This is largely a political football and from time to time a popularity contest as it is a practical element to plan and implement. Inconsistencies are rife and logic in very short supply!
In 2016 when the additional property tax was introduced, so called, to disincentivise people who already own property or to think twice about buying another which meant that whether you are a private landlord, a property mogul or simply someone who would like a holiday home for the family on the coast this would cost you an additional 3% in tax. So far so straightforward.
Then the question arose as to what would happen if you were married and only one of you had a property in their name? It would appear to be unpopular to allow someone who was married, who had a spouse who already owned a property to then be able to buy another property without applying the new charge. So it was determined that as a married couple you would be treated as a single unit and if your husband or wife had a property in their name then by default so would you and you could not escape the tax.
Indeed for a little while the government wanted to charge tax even if you were transferring the property from one married couple to the other which was not resolved until late 2017 (whilst largely an unintended consequence that demonstrates thoughtlessness into the subtleties of marriage).
Then on the 1st April in comes the additional non-residence tax of 2021, whereby the cause is to make it more costly for those who do not live in the UK to acquire residential homes, and those who intend to live and stay in the Country would get preferential treatment in England. How to make this happen in practice? It was decided that a whole new definition of a ‘Resident’ would be created and the number 183 took on a new significance. If you cannot show that you were here for that many days in the 12 months before you complete your purchase you would have to pay an additional 2%. This change received very little attention in the media as presumably it cannot be unjust to favour people who live in this country from buying houses that they intend to live in! In order to make this work for modern families where you would have a great difficulty if one of you were to live overseas for work and family but perhaps the other lives here also for work and family there is a bigger difficulty. The writer found around the time the tax came in that the guidance on the tax was still extremely unclear as HMRC were still in the process of writing it! It would appear that in this area the current wisdom and popular approach is to make it so that if one of the spouses fulfilled the criteria then even if the other spouse lives overseas you would both benefit by the term resident covering both. A sigh of relief was again released as those married and long suffering would have to check the position carefully.
It would seem to be impossible to predict how any particular tax will apply and has become so very complicated in practice. Those married should proceed with additional caution and always obtain specialist and suitable tax advice at the time you proceed. Perhaps this little insight will give you an idea of how hard it is to predict how a tax will apply before you get there as change is seemingly constant. Given SDLT can have severe effect on peoples’ homes and lives which are central to family life, it is perhaps the most intrusive a government can be and the financial incentive to pay tax or not has a real impact on how people choose to live. A little more care and advance notice would be welcome as real lives are affected.
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