Do I pay Stamp Duty Land Tax (SDLT) on a transfer of equity?
HMRC Stamp Duty rules are complex. Find out if you will need to pay any tax and if so, how much. See our easy to follow Transfer of Equity Stamp Duty Table below:
See also:
- Do I need a solicitor to add a spouse to property deeds?
- How to Transfer Equity in a Property with a Mortgage
- Gifting Property to Children? How to Transfer Home Ownership
- Do I Need a Solicitor to Remove an Ex from Property Deeds?
- A Guide to Transferring Equity on a Second Home
- The Transfer of Equity Process Explained
- Transfer of Equity Conveyancing Quotes
How is Stamp Duty calculated on an equity transfer?
Stamp Duty Land Tax (SDLT) is payable on the 'Chargeable Consideration' when transferring equity held in property or land.
When buying a property, chargeable consideration is the amount of money a buyer pays for the property.
However, when equity in a property is transferred from one person to another, chargeable consideration is calculated on the amount of debt transferred or taken on.
When transferring equity - Stamp Duty is payable on the amount of the mortgage being taken on by the new owner.
For example:
David owns a property worth £600,000 and has an outstanding mortgage of £400,000.
David and Sheila get married, and David transfers 50% ownership of the property to her.
Sheila will have to pay Stamp Duty on £200,000 (£400,000/2 = £200,000 - this being the 'Chargeable Consideration')
Is the Stamp Duty threshold the same on an equity transfer?
Yes. SDLT will only be payable if the chargeable consideration exceeds the threshold (£125,000). The threshold is the same as if it would be when purchasing a property.
How much Stamp Duty will I have to pay?
Residential Rates on purchases from 8 July 2020 to 31 March 2021 have been reduced as part of then COVID-19 response.
The rates are:
| Bracket | Standard rate | Buy-to-let/second home rate |
|---|---|---|
| Up to £500,000 | 0% | 3% |
| The next £425,000 (the portion from £500,001 to £925,000) | 0% | 8% |
| The next £425,000 (the portion from £925,001 to £1.5 million) | 5% | 13% |
| The remainder (i.e. the amount over £1.5m) | 10% | 15% |
When is Stamp Duty payable on a transfer of equity*
| Circumstances | SDLT Payable | Comment |
|---|---|---|
|
No mortgage |
No |
Stamp Duty 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 equity being transferred is greater than the SDLT threshold |
|
The transfer is a gift |
NO |
If there is no consideration, SDLT does not usually apply |
|
If one person 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 maybe payable. If the larger share is given as a gift then there is no 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. To speak to a solicitor, without obligation, call 0800 612 7456.
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