Planning to move in with a partner? Beware this tax rule that could cost you £1000s

Be aware of the little-known tax rule that could cost you thousands

You probably didn't know that adding your partner to mortgage deeds can result in additional stamp duty charges. This potential pitfall of changing who's on your mortgage is rarely talked about, but it can result in a hefty, unexpected tax bill.

Related: The stamp duty holiday has been extended - Here's everything we know

Before you panic, adding a partner to your mortgage does not automatically mean that you'll have to pay more stamp duty. Most case scenarios in which one partner or spouse buys the property and then adds their partner's name to the deeds are straightforward and won't result in any additional charges.

However, there is one common situation when this will be the case that you need to be aware of.

building with brick wall and plants

(Image credit: Future PLC/Veronica Rodriguez)

Adding partner to mortgage stamp duty warning

According to Pete Mugleston, MD and Mortgage Expert at Online Mortgage Advisor the first and 'most common' case when you'll need to pay stamp duty after adding your partner onto the mortgage 'is if the person who's joining the mortgage is taking on a bigger share of the property, or all of the share.'

'If the amount they are paying to buy themselves onto the mortgage is higher than the current stamp duty threshold, you must tell HMCR and pay the charge,' he explains.

What this means in practice is that if, for example, you've bought a house for £500,000 and have £400,000 on your mortgage and then decide to transfer half of that to your partner or spouse, their share of the mortgage will be over the threshold – which is £125,000 from 1st April 2021. They will then need to pay stamp duty on the £75,000 that's over that threshold.

house with blue door and potted plants

(Image credit: Alamy)

Fortunately, this rule does not affect partners or spouses who go half-half at the time of the house purchase.

'Stamp duty isn't usually payable if you're taking on an equal share of the property or have been transferred equity as a gift, but it's always advisable to contact HMRC to double-check the full tax implications of adding someone to your mortgage before you proceed,' Pete explains.

Related: Property expert shares tips on buying a house during the recession

If you do need to declare your new property co-owner, you can find out more on how to do this on the official website.

Don't be caught out by a hefty tax bill.

Anna Cottrell is Consumer Editor across Future's home brands. She moved to the world of interiors from academic research in the field of English Literature and photography. She is the author of London Writing of the 1930s and has a passion for contemporary home decor and gardening.