Do I pay Stamp Duty Land Tax (SDLT) on a transfer of equity?

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Depending on the circumstances, Stamp Duty Land Tax (SDLT) may be payable when transferring equity in a property or land. We explain when Stamp Duty will be payable and and how it is calculated.

What is a transfer of equity?

A 'transfer of equity' is when an existing owner of a property (or land) adds or removes one or more people to the title (ownership) of the property, or transfers full ownership of the property to another person.

Examples of when you might transfer equity include:

  • Selling your share in a property
  • Buying out an ex-partner
  • Buying out a joint owner
  • Adding a new partner or spouse to the title of your property
  • Gifting a property (or share in a property) to a child
  • Inheritance Tax (IHT) planning.

What is Stamp Duty Land Tax (SDLT)?

Stamp Duty Land Tax (SDLT) is a tax payable to HMRC on property and land purchases.

Unless you are an eligible first-time buyer, you pay SDLT when you buy a residential property in England or Northern Ireland for more than the current threshold of £125,000.

(In Scotland, you pay Land and Buildings Transaction Tax (LBTT), and in Wales you pay Land Transaction Tax (LTT).)

Is Stamp Duty payable when transferring equity in a property or land*

Stamp Duty may be payable, depending on the circumstances:

Circumstances SDLT Payable Comment

No mortgage

No

SDLT is only payable on the mortgaged part of the property. If the property is wholly owned then no Stamp Duty is payable
Getting married, entering into a civil partnership or moving in together Yes

SDLT is payable if the chargeable consideration being transferred is greater than the SDLT threshold

The transfer is a gift and there is no mortgage

No

If there is no chargeable consideration, SDLT does not usually apply

If one co-owner takes on a larger share

Maybe

If a property is jointly owned and the equity is split equally, no SDLT will be payable. However, if one person takes on a larger share, SDLT may be payable. If the larger share is given as a gift then there is no chargeable consideration and SDLT will not be payable.

Transfer of outstanding mortgage

Maybe

If one person takes over another person’s ownership of a property, the property is mortgaged, and the consideration is above the threshold, SDLT will be payable.

Divorcing/dissolving civil partnership

No

No SDLT payable. Also applies if the marriage is annulled or a legal separation is entered into.

You are left the property in a will

No

No SDLT is payable, even if you take on the mortgage on the property from the date the person died.

Sce: https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-propertyy

Table applies to property equity transfers in England only.

*As with all tax matters, SDLT can be complicated. You should speak to a conveyancing solicitor to confirm your position with respect to SDLT.

Is Stamp Duty payable on the transfer of property between family members?

If the equity in the property (or the whole property), is being gifted from one family member to another (e.g. a child, spouse, civil partner or sibling), there would be no consideration and SDLT would not usually be payable.

How is Stamp Duty calculated on a transfer of equity?

When transferring equity held in property or land, SDLT is payable on the 'chargeable consideration'.

When buying a property, chargeable consideration is the amount of money a buyer pays for the property.

However, when equity in a property or land is transferred from one person to another, chargeable consideration is calculated as follows:

The amount of debt transferred or taken on (the mortgage) plus the amount of cash being paid for the share of the equity.

Example:

David owns a property worth £600,000 and is mortgage-free.

David and Sheila get married and David gives 50% ownership of the property to Sheila. As there is no mortgage, there is no 'chargeable consideration' and therefore no SDLT is payable.

However, if in the above example, David has an outstanding mortgage of £400,000, Sheila will have to pay SDLT on £200,000 (£400,000/2 = £200,000) - this being the 'Chargeable Consideration'.

If, in addition to the outstanding mortgage of £400,000, Sheila pays David

Is the Stamp Duty threshold the same on an equity transfer?

Yes. SDLT will only be payable if the chargeable consideration exceeds the minimum threshold of £125,000. If the transfer of equity is in a second property (e.g. a buy-to-let), the minimum threshold is £40,000.

How much Stamp Duty will I have to pay on a transfer of equity?

The current SDLT rates are:

Chargeable Consideration SDLT % Rate Second Home SDLT % Rate*
Up to £125,000 0% 3%
The next £125,001 - £250,000 2% 5%
The next £250,001 - £925,000 5% 8%
The next £925,001 - £1.5m 10% 13%
The amount over £1.5m 12% 15%

*If equity is being transferred in a buy-to-let or second property, an additional 3% stamp duty must be paid on all the relevant bands if the chargeable consideration is more than £40,000.

Your next step

Whether you are gifting a property to a child, getting married or separating, or transferring equity for any other reason, we can help you find an expert conveyancing solicitor. Even if you are just looking for advice, we can help.

If you are also planning to remortgage as part of the transfer process, the remortgage legal work can be completed at the same time as your transfer of equity.

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Disclaimer

Quittance Legal Services does not provide tax or accounting advice. This article is provided for informational purposes only and should not be relied on for, tax or accounting advice. You should consult with your own tax and accounting advisors.

Chris Salmon, Director

Author:
Chris Salmon, Director