Stamp Duty Land Tax (SDLT) may become payable when all or part of an interest in land or property is transferred from one person to another if anything of monetary value is given in exchange.
Anything of monetary value that's given in exchange for the property is referred to as the 'consideration'. This can be cash or another type of payment. It can also include the value of any outstanding mortgage that the buyer takes over. SDLT may be charged on the consideration.
The rules for working out how much SDLT is payable (if any) may depend on the circumstances in which the property is transferred. This guide explains some different ways that property can be transferred and whether or not SDLT is payable.
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SDLT may be payable when a share in a property is transferred to a husband, wife or partner when they either:
SDLT is payable if the consideration given in exchange for the transfer of the share is more than the current SDLT threshold for the property type.
The consideration can include:
A house is valued at £180,000. Jane Brown is the owner of the property and has equity of £90,000 and an outstanding mortgage of £90,000. Jane transfers a half share of the property to her partner John Smith.
So the consideration for SDLT purposes is £90,000, made up of:
Because £90,000 is below the current SDLT threshold there is no tax to pay. But HM Revenue & Customs (HMRC) must still be notified of the transaction on an SDLT return.
Richard King is the owner of a property valued at £500,000. The equity amounts to £100,000 and there is an outstanding mortgage of £400,000.
Richard transfers half the property to his wife Liz when they marry and in turn she takes on half the mortgage of £200,000.
SDLT is charged on the amount paid for a property or the amount of 'consideration' given. By taking liability for the mortgage Liz has given 'consideration' of £200,000 for her share of the property and so SDLT is charged on that amount.
The amount of the equity is not included in the calculation as SDLT is only charged on the consideration given.
SDLT is charged at 1% on £200,000 so Liz will pay £2,000 SDLT and notify HMRC of the transfer by completing an SDLT return.
If the transfer is a gift and no consideration in money or money’s worth is given then SDLT does not normally apply. Read the section below on ‘Receiving land or property as a gift or from a will’.
SDLT isn't payable if an interest in land or property is transferred to one or other of the couple as part of an agreement or court order because they're:
This also applies if the partners agree to either:
In these cases there's no need to notify HMRC of the transfer, even if the value is more than the SDLT threshold.
The position for SDLT is different 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. In these cases SDLT may be payable.
SDLT isn't payable if two or more people jointly own property - whether held as joint tenants or tenants in common - and they decide to divide it physically and equally and own each part separately.
But if one person takes a bigger share - or all of the other's share - and pays cash or some other consideration in exchange, then HMRC must be notified of the transaction. And if the amount they pay is more than the current threshold, they'll have to pay SDLT on it. See the example four below.
Joint owners (which may include unmarried couples who are splitting up) may agree that just one of them will take over ownership of a property they bought together, including any outstanding mortgage on the property.
In this case SDLT is payable by the person taking over ownership on the total chargeable consideration of the following (either or both), if it exceeds the threshold:
Mike Jones and Anne Green own a house equally together that's valued at £400,000. They have equity in the property of £300,000 and an outstanding mortgage of £100,000.
Anne Green is going to have sole ownership of the property.
So the consideration for SDLT purposes is £200,000, made up of:
Because £200,000 is above the SDLT threshold, tax at the rate of 1 per cent is due, which is £2,000. This is payable by Anne.
When a property is jointly owned, if you split the property equally SDLT isn't payable, However, if one person takes on a larger share they may need to pay SDLT.
In the following example two brothers own land and property in equal shares that they want to divide up geographically.
Ken Smith and John Brown own a farm jointly in equal shares. It's valued at £2 million. They decide to split the ownership of the farm geographically and each takes 50 per cent of the land.
If the value of each half of the land is the same, then no SDLT is due.
But in this example the land taken by Ken Smith happens to include the farmhouse and farm buildings. Ken's land is valued at £500,000 more than the land that John Brown takes. The shares are:
Ken decides to compensate John by paying him £250,000 to make things fair.
SDLT is payable on this £250,000 because it's more than the current threshold.
It's different if one person takes a bigger share but doesn't pay anything in return (there is no 'consideration'given including taking on liability for a mortgage). No SDLT is payable, even if the value of the extra part of the share is more than the SDLT threshold. There's no need to notify HMRC of the transaction either.
Someone might be left land in a will or receive it as a gift, for example from their:
If the property is acquired under the terms of a will, there's no need to notify HMRC and no SDLT is payable. This applies even if the beneficiary takes on an outstanding mortgage on the property on the date the person died, provided that no other consideration is given.
If the property is received as a gift there's no SDLT to pay, so long as there's no outstanding mortgage on it. But if the person who receives the gift takes over some or all of an existing mortgage, then SDLT may be payable if the value of the mortgage is over the SDLT threshold.
A husband decides to transfer a half share in a property he owns to his wife. She doesn't make any cash payment for this share, but there is an outstanding mortgage on the property. The amount outstanding is more than the current threshold, so SDLT is payable. It's payable even if the husband retains the mortgage. They'll need to notify HMRC of the transaction.
In certain circumstances SDLT is payable on not less than the market value of a property - not the consideration given - when it's transferred to a company, for example, a property has a market value of £200,000 but the company only pay a consideration of £100,000, SDLT will be payable on £200,000.
This applies in either of the following situations:
If you need any help with working out whether or not SDLT is payable, you can contact the HMRC Stamp Taxes Helpline.