Stamp Duty Land Tax: transfer ownership of land or property in England and Northern Ireland

You might think Stamp Duty Land Tax (SDLT) is a one-off payment when you buy a home and it will never have to be paid on that property again. But if the owner transfers all or part of the property, then there might be SDLT to pay. In this guide, you’ll find out when SDLT might and might not be due.

Why might more Stamp Duty be payable?

Except for commercial transactions, Stamp Duty Land Tax (SDLT) might be due if:

  • all or part of the ownership of a property is transferred to you, and
  • the value of what is being transferred is over the the SDLT threshold.

Until 30 June 2021, the SDLT nil rate band in England and Northern Ireland is £500,000.

From 1 July to 30 September 2021, the SDLT nil rate band is £250,000, and from 1 October 2021, it’s £125,000.

How much SDLT you pay depends on what is called the chargeable consideration.

The chargeable consideration is the price paid for the property. This usually involved a cash payment, taking on liability for all or part of the outstanding mortgage or a combination of both.

However, it can include anything of monetary value, such as offering to pay legal fees or transferring other assets, like land or other properties, as part of the deal.

The following are examples of when SDLT might or might not be due when transferring land or property in England and Northern Ireland.

When Stamp Duty will be due?

Stamp Duty Land Tax (SDLT) might be due if the chargeable consideration is over the £500,000 threshold.

For your main property, SDLT is charged at 5% of the part of the price between £500,001 and £925,000 and 10% between £925,001 and £1.5 million and 12% on anything above £1.5 million.

If this is a second property, or a buy-to-let, then you will pay an additional 3% on all the relevant bands if it’s worth more than £40,000.

If you do need to pay SDLT, then you will need to complete an SDLT return.

Transfer of the outstanding mortgage

Joint owners might agree to transfer the ownership of a property they own together to just one of them. For example, an unmarried couple who are splitting up.

If you’re taking sole ownership you will need to pay SDLT on the total chargeable consideration.

For example, a house is valued at £400,000 with £100,000 outstanding on the mortgage and £300,000 in equity.

The person taking ownership:

  • pays the other £150,000 for the other half of the £300,000 equity in the property and
  • becomes responsible for the other half of the remaining mortgage, which is £50,000.

This gives a chargeable consideration of £200,000.

Under these circumstances, and assuming this is not a second property, you’ll pay no SDLT and will not need to submit an SDLT return.

Where an individual has taken ownership of equity in a property which has a mortgage. Then stamp duty will usually only be payable if the chargeable consideration is above the current threshold of £500,000.

The transfer is over the threshold

The owner of a property worth £500,000, with an outstanding mortgage of £400,000, gets married.

They transfer half of the property to their partner, who takes on responsibility for half of the mortgage.

The person receiving the transfer has a chargeable consideration of £200,000, but will not pay SDLT (assuming this is their only property).

If there is an unequal split

If joint owners split a property unequally and the person with the larger share compensates the other, this compensation might be liable for SDLT, if it’s above the £500,000 threshold.

For example, a two-floor house is split into two apartments, but the ground floor apartment has sole-access to the garden. Because of this, the ground floor flat is worth more and the owner of this part of the property financially compensates the other.

If this is compensation is above £500,000 the person being compensated will have to pay SDLT on the amount over the threshold and submit a SDLT return

However, if the owner decides not to compensate the other, or it’s given as a gift, there is no consideration and no SDLT to pay.

Transferring land or property to or from a company

When property is transferred to a company, SDLT might be payable on its market value, not the consideration given.

For example, if a property has a market value of £600,000 but the company only pays a consideration of £300,000, SDLT will still be payable on £600,000.

This applies in either of the following situations:

  • the person who transfers the property is ‘connected’ with the company - the definition of a connected person covers relatives and people who’ve some involvement with the company
  • the company pays for the property with shares in the company (partly or wholly) to the person making the transfer, where that person is connected to the company (but not necessarily the acquiring company).

When Stamp Duty will not be due

Under a number of circumstances, all or part of a property can be transferred without having to pay Stamp Duty, for example if the amount being transferred is below the £500,000 Stamp Duty Land Tax (SDLT) threshold.

For example, a property is worth £200,000, with equity of £100,000 and an outstanding mortgage of £100,000. The owner transfers half of the ownership and you pay £50,000 cash for the equity and takes on responsibility for half of the remaining mortgage.

This would give a chargeable consideration of £100,000, which is below the SDLT threshold.

However, you might still need to tell HM Revenue & Customs (HMRC) and complete a Stamp Duty Land Tax (SDLT) tax return.

If the transfer is a gift

If the transfer is a gift and there’s no consideration, SDLT doesn’t normally apply.

A gift is different from a transfer as there is no transfer of monetary value. This means the person receiving the property pays no cash for their share, takes on no liability for the mortgage and offers no asset in exchange, so there is no chargeable consideration.

For example, a homeowner gets married, enters a civil partnership or moves in with their partner and decides to transfer half of the property to their partner. If the partner does not pay anything in cash for this and does not take on legal liability for any outstanding mortgage, then this is a gift and is not subject to SDLT.

If you inherit the property in a will

If you inherit land or property under the terms of a will, there’s no need to tell HMRC and you won’t pay SDLT. This applies even if you take on an outstanding mortgage on the property on the date the person died.

If you transfer property because of divorce, separation or the end of a civil partnership

You don’t pay SDLT if you transfer an interest in land or property to your partner as part of an agreement or court order because you’re either:

  • divorcing
  • dissolving a civil partnership.

This also applies if the partners either:

  • annul their marriage
  • legally separate.

In these cases, you don’t need to tell HMRC about the transfer, even if the value is more than the SDLT threshold.

If joint owners are unmarried and not in a civil partnership when they transfer an interest in land or property from one joint owner to another then you might have to pay SDLT.

If you’re dividing up a jointly-owned property

A more complicated scenario is if two or more people own a property jointly, either as joint tenants or tenants in common.

If the property is split physically (into totally separate dwellings) and equally (evenly between the joint owners), then there will be no Stamp Duty to pay.

If the property is not split equally between the joint owners, you might have to pay SDLT.

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