Stamp Duty Land Tax: land and property transfers

Many people associate Stamp Duty Land Tax (SDLT) as being something you pay when you buy a property.

However, if you transfer ownership of land or property, then Stamp Duty Land Tax may be payable by the person receiving the transfer. However, this will depend on the type of transfer, if it is a jointly owned property, your marital status, whether the transfer is a gift and some other factors.

In this blog, we’ll explore what you need to know about Stamp Duty Land Tax on property or land transfer.

Do you pay Stamp Duty Land Tax on property transfers?

When all or part interest in land or property is transferred to you and you give anything of monetary value in exchange or you take on outstanding debt on the property or land then you may need to pay Stamp Duty Land Tax on the transfer.

Giving anything with monetary value or taking on outstanding debt in exchange for a property or land is called chargeable consideration (see more details below).

What is chargeable consideration?

Most people pay money in exchange for a property. However, some people use other ways to pay for a property i.e. they give something of value in exchange for the land or property. For example, in exchange for property or land you may give goods, services, or you may take on outstanding debt like taking on liability for all or part of an outstanding mortgage on the property. When this happens, it is called ’chargeable consideration’.

Chargeable consideration will affect the amount of SDLT payable - see below more details for a variety of circumstances and where charegeable consideration is taken into account.

Find out more about chargeable consideration here.

Do you pay stamp duty when gifting a property?

Generally, if you receive property or land as a gift and there is no outstanding mortgage on the property, you will not pay Stamp Duty Land Tax.

The person gifting the property is also not liable for any Stamp Duty Land Tax as SDLT is only payable when you purchase or receive a property using cash or chargeable consideration (see above).

Stamp Duty Land Tax when transferring ownership of land or property

If you marry, enter into a civil partnership or set up home together

If you marry, enter a civil partnership or move in together and your spouse or civil partner takes a share of the property, you will pay Stamp Duty Land Tax if the chargeable consideration exceeds the current Stamp Duty threshold (see below for current thresholds and above for details of chargeable consideration).

If the transfer is a gift

There is no chargeable consideration if the transfer is a gift upon marriage, moving in together or civil partnership.

If you transfer land or property due to divorce, separation or the end of a civil partnership

If you transfer land or property to your partner because of a court order when dissolving a civil partnership, divorcing, annulling a marriage or legally separating, there is no requirement to notify HMRC about this type of transfer or pay SDLT, even if it is above the current threshold.

Unmarried couples and other joint owners, if you transfer or divide up jointly owned property or land

In the case of unmarried couples or people who are joint owners and not in a civil partnership, then you may have to pay Stamp Duty Land Tax when you transfer ownership or an interest in land or property from one joint owner to another.

If two or more people jointly own the property or land (joint tenants in common) and you own each part of the property or land separately on an equal basis, you do not pay Stamp Duty Land Tax.

If one of the joint owners takes all of the others share or a larger share in the property or land and cash or some other form of chargeable consideration is exchanged (for example debt transferred) then the person taking ownership is required to file a Stamp Duty Land Tax Return with HMRC. You will pay SDLT if the amount paid in cash or chargeable consideration is more than the current threshold (see below for current thresholds).

Taking a larger share of a jointly owned property as a gift

If you take a larger share of a jointly owned property but it is gifted to you (and you don’t pay anything in return in either cash or chargeable consideration) then you will not pay Stamp Duty Land Tax and will not need to report anything to HMRC.

Transfer of outstanding mortgage debt

If joint owners agree that one person will take over complete ownership and this includes taking over any existing mortgage debt, then the person that takes ownership will pay Stamp Duty Land Tax on both or either the cash payment or the proportion of outstanding mortgage, if it exceeds the Stamp Duty threshold.

Will I pay SDLT if I inherit a property?

If you inherit a property, you do not have to pay SDLT on the market value of the property or notify HMRC of the property being left to you. This is the case even if you take on an outstanding mortgage on the property on the date the person died. This is on condition that no other chargeable consideration is given.

Will I pay SDLT if I transfer a private property into a limited company?

When an individually owned property is transferred into a company, SDLT may be payable on its market value (rather than the chargeable consideration given).

For example, if the property is valued at £500,000 but the company only pays a total chargeable consideration of £250,000, the SDLT payable will be based on the market value of £500,000.

This is the case if the person transferring the property is ’connected’ with the company (i.e. relatives or those with company involvement) or if the company pays for the property with a share transfer, where the person is connected to the company.

Find out more about transferring property into a limited company here.

Will I pay Stamp Duty Land Tax if I transfer equity within the SDLT threshold?

SDLT is only payable on transfer of equity if the chargeable consideration exceeds the £250,000 threshold.

How do I avoid stamp duty when transferring property?

The only times that Stamp Duty may not payable when transferring a property is when:

• 1. It is a gift (where no cash, chargeable consideration or outstanding mortgage exists).
• 2. If you inherit property in a will (assuming no chargeable consideration is given).

Is stamp duty payable on transfer of property between family members in the UK?

This will depend on the circumstances and the legal status of your relationship. See above re: transferring property to civil partners or spouses.

If you want to pass your property or a share of your property to your children, then SDLT will be payable if the equity transfer or mortgage exceeds the £250,000 threshold.

Many people transfer property to children through gifting. This is often done to ensure that the children will not have to pay inheritance tax when you die. Your children can reduce or mitigate IHT if you live for another 7 years after gifting the property.

Find out more about gifting property to children here.

How do I transfer property to a family member tax free in the UK?

There is no simple answer to this as it will depend on many things, such as value of the property, any outstanding mortgage or debt on the property, how you transfer the property etc.

You will need to consider not only Stamp Duty Land Tax but also Inheritance Tax and Capital Gains Tax when transferring a property to a family member.

This area is complex so you should seek professional advice to ensure you can transfer the property as tax efficiently as possible.

Find out more about gifting property to children here.

Summary

Transferring ownership of land or property can be complex as to whether the person receiving the property is liable for SDLT. It is best to seek advice on your specific circumstances from accountants and tax advisors such as dns accountants.

Our property and tax teams are highly experienced in dealing with property transfers and ensuring that you can do this in the most tax efficient way.

For more help and advice on transferring equity, property or land call us on 03300 886 686, or you can also e-mail us at enquiry@dnsaccountants.co.uk.

Stamp Duty Land Tax SDLT frequently asked questions

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