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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.

When might Stamp Duty become payable?

For residential transactions Stamp Duty Land Tax (SDLT) might be due if for example:

  • all or part of the ownership of a property is transferred to you, and
  • the value of what is being transferred is over the SDLT threshold.
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Until 30 September 2021, the SDLT nil rate band in England and Northern Ireland is £250,000.

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 including any fixtures and fittings. This might involve 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 not be due when transferring or gifting land or property in England and Northern Ireland.

When Stamp Duty will be due?

You might need to pay Stamp Duty Land Tax (SDLT) when all or part of an interest in land or property is transferred to you and you give anything of monetary value in exchange (the chargeable consideration).

Stamp Duty Land Tax (SDLT) might be due if the chargeable consideration is over the £250,000 threshold.

For your main property, SDLT is charged at 5% of the part of the price between £250,001 and £925,000 and 10% between £925,001 and £1.5 million and 12% on anything above £1.5 million.

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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 usually still need to complete an SDLT return unless the transaction is exempt – for example this might be because no money or other payment has changed hands.

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Transfer of equity within the SDLT threshold

A transfer of equity means a change in legal ownership of a property. It will often take place where a borrower is added to or released from a mortgage. How much SDLT you pay will depend on the circumstances of the property transfer.

Joint owners (including unmarried couples) 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 with one taking sole ownership may 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 (assuming the property is owned in equal shares).

This gives a chargeable consideration of £200,000.

Where an individual has taken ownership of equity in a property which has a mortgage, Stamp Duty will usually be payable if the chargeable consideration is above the current threshold of £250,000. This changes to £125,000 from the 1st October 2021. In this case no SDLT is due however the new owner must inform HMRC by filling in an SDLT return.

Transfers of equity over the SDLT 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).

From 1 October 2021, when the SDLT threshold is £125,000, the chargeable consideration will be over the threshold. At this point, the new owner will have an SDLT liability of £1,500 (0% of £125,000 and 2% of £75,000). 

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 £250,000 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.

When might Stamp Duty not be payable

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 normally have to pay SDLT provided no other consideration has been given. This applies even if you take on an outstanding mortgage on the property on the date the person died.

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

You won’t normally have to 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 if you’re not married or in a civil partnership

If two or more people own a property jointly, either as joint tenants or tenants in common and ownership is divided equally, then SDLT is not normally payable.

Where a property transfer results in unequal ownership or one person takes over ownership of the entire property and pays cash or some other form of consideration in exchange which is over the current SDLT threshold then tax may be payable.

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impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

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