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

HMRC Stamp Duty Land Tax 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 Guide below:

How is Stamp Duty calculated on a transfer of equity?

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 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 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 minimum threshold. The threshold is the same as if it would be when purchasing a property. If the transfer of equity is in a second property (e.g. a buy-to-let or BTL), the minimum threshold is £40,000.

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

Residential Rates on purchases from 8 July 2020 to 31 March 2021 have been reduced as part of the 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) 5% 8%
The next £575,000 (the portion from £925,001 to £1.5 million) 10% 13%
The remainder (i.e. the amount over £1.5m) 12% 15%

How much Stamp Duty will I have to pay on a buy-to-let property (BTL) or second home?

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.

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 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.

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.

Helen Goddard, Legal researcher

Author:
Helen Goddard, Legal researcher