You may have to pay Stamp Duty Land Tax (SDLT) on transfers of land or property depending on the type of transfer, your marital status and other factors.
SDLT no longer applies in Scotland. Instead you pay Land and Buildings Transaction Tax when you buy a property.
You may need to pay 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.
Anything of monetary value that you give in exchange is called the ‘chargeable consideration’.
The rules you use to work out how much SDLT you pay depend on the circumstances of the property transfer.
If you marry, enter into a civil partnership or set up home together
You might pay SDLT when you transfer a share in a property to a husband, wife or partner when you do one of the following:
- enter into a civil partnership
- move in together
You pay SDLT if the consideration given in exchange for the share transfer is more than the current SDLT threshold for the property type.
Example 1 - you don’t pay SDLT
A house has a value of £180,000. The owner of the property has equity of £90,000 and an outstanding mortgage of £90,000. The owner transfers a half share of the property to their partner.
- pays cash for half of the equity - £45,000
- takes responsibility for 50% of the outstanding mortgage - £45,000
So the consideration for SDLT is £90,000, made up of the:
- cash payment
- 50% share of the outstanding mortgage
£90,000 is below the current SDLT threshold so there’s no tax to pay. You must still tell HM Revenue and Customs (HMRC) about the transaction on an SDLT return.
Example 2 - you pay SDLT even though no money changes hands
The owner of a property valued at £500,000 with an outstanding mortgage of £400,000 transfers half the property to their partner when they marry. Their partner takes on 50% of the mortgage (£200,000).
HMRC charge SDLT on the amount paid for a property or the amount of ‘consideration’ given.
By taking liability for the mortgage, the owner’s partner has given ‘consideration’ of £200,000 for their share of the property which is £1,500 SDLT (0% of £125,000 + 2% of £75,000).
They must pay SDLT on that amount and tell HMRC about the transfer by filling in an SDLT return.
The equity isn’t included in the calculation as you only pay SDLT on the consideration given.
If the transfer is a gift
If the transfer is a gift and there’s no consideration, SDLT doesn’t normally apply.
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:
- dissolving a civil partnership
This also applies if the partners either:
- annul their marriage
- legally separate
In these cases there’s no 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 may have to pay SDLT.
If you transfer or divide up jointly-owned property or land: unmarried couples and other joint owners
You don’t pay SDLT if 2 or more people jointly own property (as joint tenants or tenants in common) and you 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, you must tell HMRC. If the amount you pay is more than the current threshold, you’ll pay SDLT on it, see example 4.
Transfer the outstanding mortgage
Joint owners (this 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.
In this case the person taking ownership will pay SDLT on the total chargeable consideration of the following (either or both), if it exceeds the SDLT threshold:
- any cash payment that one of the couple makes to the other for their share
- the proportion of the outstanding mortgage that belongs to the share of the property being transferred
A couple own a house equally together and:
- it’s valued at £400,000
- they’ve equity in the property of £300,000
- they’ve an outstanding mortgage of £100,000
They transfer ownership so that one of them will have sole ownership of the property. The new sole owner:
- pays cash for half of the equity - £150,000
- becomes responsible for the other person’s half of the outstanding mortgage - £50,000
The consideration for SDLT is £200,000, made up of the:
- cash payment
- 50% share of the outstanding mortgage
The new sole owner pays £1,500 SDLT (0% of £125,000 + 2% of £75,000) and must tell HMRC by filling in an SDLT return.
Take on a larger share of jointly owned property
When a property is jointly owned, if you split the property equally SDLT isn’t payable. But if one person takes on a larger share they may need to pay SDLT.
Two people own a farm jointly in equal shares. It’s valued at £2 million. They split the ownership of the farm geographically and each takes 50% 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 person 1 includes the farmhouse and farm buildings. This owner’s land is worth £500,000 more than the land that the other owner - person 2 - takes. The shares are:
- person 1 - £1,250,000
- person 2 - £750,000
Person 1 compensates person 2 and pays them £250,000.
SDLT is payable on this £250,000 because it’s more than the current threshold.
If the larger share is given outright as a gift
If you take a bigger share but don’t pay anything in return, there’s no ‘consideration’ given including taking on liability for a mortgage. You won’t pay SDLT, even if the value of the extra part of the share is more than the SDLT threshold. You don’t need to tell HMRC about the transaction.
If you get land or property as a gift or from a will
If you’re left land or property in a will
If you get 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. This is on condition that no other consideration is given.
You’re given property as a gift
If you get property as a gift you won’t pay SDLT as long as there’s no outstanding mortgage on it. But if you take over some or all of an existing mortgage, you’ll pay SDLT 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. He doesn’t take a cash payment for this share, but there’s an outstanding mortgage on the property. The amount outstanding is more than the current threshold, so SDLT is payable, even if the husband keeps the mortgage. He must tell HMRC about the transaction.
If you transfer land or property to or from a company
When property is transferred to a company, SDLT may be payable on its market value, not the consideration given. For example, if a property has a market value of £200,000 but the company only pays a consideration of £100,000, SDLT will still be payable on £200,000.
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
- 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)
Higher rates of SDLT may be charged from 1 April 2016 on purchases of additional residential properties.