Stamp Duty When Transferring Property Ownership

Transferring property ownership doesn't always mean paying Stamp Duty Land Tax (SDLT), but the rules depend heavily on your circumstances. Whether you're adding a partner to the deeds, divorcing, or gifting property to family, you need to understand when SDLT applies and when transfers are exempt—particularly if there's a mortgage involved.

What counts as 'chargeable consideration'

SDLT is charged when you receive an interest in property and give something of monetary value in exchange. This something is called 'chargeable consideration', and it includes:

• Cash payments
• Taking on responsibility for a mortgage or part of one
• Any other payment or valuable consideration

Even if no money changes hands, taking on liability for a mortgage counts as chargeable consideration and can trigger an SDLT charge.

Transferring property to a spouse or partner

When you marry, enter a civil partnership, or move in together, you might transfer a share of your property to your partner. You'll pay SDLT if the chargeable consideration exceeds the current SDLT threshold.

Example with mortgage liability:

A property worth £700,000 has an outstanding mortgage of £600,000. The owner transfers half the property to their partner when they marry, and the partner takes on 50% of the mortgage (£300,000). By accepting liability for £300,000 of mortgage debt, the partner has given chargeable consideration of £300,000. This results in an SDLT bill of £2,500 (calculated as 0% on the first £250,000, then 5% on the remaining £50,000).

Example with no SDLT due:

A house valued at £180,000 has equity of £90,000 and an outstanding mortgage of £90,000. The owner transfers half to their partner, who pays £45,000 cash for half the equity and takes on £45,000 of the mortgage. The total chargeable consideration is £90,000—below the SDLT threshold, so no tax is due. You must still notify HMRC by submitting an SDLT return.

Gifts with no mortgage:

If you transfer property as a gift with no chargeable consideration (including no mortgage liability being taken on), SDLT does not apply.

Transfers on divorce or separation

You do not pay SDLT when transferring property to a spouse or civil partner as part of a divorce, dissolution of civil partnership, annulment, or legal separation agreement. This exemption applies whether the transfer follows a court order or a mutual agreement.

You don't need to tell HMRC about these transfers, even if the property value exceeds the SDLT threshold.

Transfers between unmarried joint owners

If you're not married or in a civil partnership and jointly own property, different rules apply.

Equal physical division:

When two or more people jointly own property (as joint tenants or tenants in common) and divide it physically and equally, with each person owning their separate part, no SDLT is due.

Unequal division:

If one person takes a larger share and pays cash or other chargeable consideration in exchange, you must notify HMRC by filing an SDLT return. If the payment exceeds the threshold, SDLT is payable.

Example of unequal split:

Two people own a £2 million farm in equal shares. They split it geographically, but person 1's share (including the farmhouse and buildings) is worth £1,250,000, while person 2's share is worth £750,000. Person 1 pays person 2 £250,000 to compensate for the difference. SDLT is due on this £250,000 because it exceeds the threshold.

Taking a larger share as a gift:

If you take a bigger share but don't pay anything in return—including not taking on mortgage liability—there's no chargeable consideration. You won't pay SDLT even if the value exceeds the threshold, and you don't need to tell HMRC.

When one partner takes sole ownership

Unmarried couples (or other joint owners) sometimes agree that one person will take over full ownership of a jointly-owned property, including any outstanding mortgage.

The person becoming sole owner pays SDLT on the total chargeable consideration if it exceeds the threshold. This includes:

• Any cash payment for the other person's share
• The proportion of outstanding mortgage being transferred

Example:

Two people own a house valued at £550,000 equally. It has £350,000 equity and a £200,000 mortgage. One person becomes sole owner by paying £175,000 cash for half the equity and taking on the other person's £100,000 share of the mortgage. The total chargeable consideration is £275,000. This results in SDLT of £1,250 (0% on £250,000, then 5% on £25,000). An SDLT return must be filed.

Receiving property as a gift or inheritance

Inherited property:

If you receive land or property under the terms of a will, you won't pay SDLT and don't need to tell HMRC. This applies even if you take on an outstanding mortgage on the property as at the date of death, provided no other chargeable consideration is given.

Gifts:

If you receive property as a gift with no chargeable consideration (no cash payment and no mortgage liability taken on), SDLT doesn't apply.

When you must notify HMRC

Even when no SDLT is due because the chargeable consideration falls below the threshold, you must still submit an SDLT return to HMRC. However, you don't need to notify HMRC for:

• Transfers on divorce or dissolution of civil partnership
• Gifts where there's no chargeable consideration
• Property inherited under a will

Scotland and Wales

These rules apply to England and Northern Ireland only. If you're buying property in Scotland (from 1 April 2015), you pay Land and Buildings Transaction Tax instead. In Wales (from 1 April 2018), you pay Land Transaction Tax.

Sources

• Stamp Duty Land Tax: transfer ownership of land or property
• Stamp Duty Land Tax

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.