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Tax for Transferring a Property

Tax for Transferring a Property

Tax for Transferring a Property

Date: April 25, 2016

It often comes as a surprise to people to discover that when they acquire a share in a property by way of a “Transfer of Equity” that Stamp Duty Land Tax (SDLT) can be payable even where no cash has changed hands.

A “Transfer of Equity” simply means a transfer in the legal ownership of a property and would include for example the following:

  1. If you marry, enter into a civil partnership or move in with a partner and the property is transferred into joint names from sole ownership
  2. If you split up with your partner and the property is transferred from joint names into a sole name (excluding land transferred as part of an agreement or court order where you are divorcing or dissolving a civil partnership)

SDLT is payable upon the “chargeable consideration” and this not only includes any money provided in consideration for Transfer but also the assumption of any outstanding mortgage.  Therefore, SDLT can be payable even though no money is changing hands. For example, Mr S owns a property valued at £400,000 and transfers half of the property to his partner when they marry. The property is subject to a mortgage of £295,000 and his partner takes on 50% of the mortgage.  Whilst no money has changed hands Mr S’s partner now has the liability of the mortgage and therefore has provided “consideration” of £147,500 and SDLT will be payable.  At the current rate SDLT of £450.00* https://www.gov.uk/stamp-duty-land-tax/residential-property-rates will be due and a return will need to be submitted to the Inland Revenue. 

Similarly, if you are transferring the property into a sole name from joint names, consideration will need to be given to the SDLT implications.  For example, X and Y own a house together which is valued at £380,000, they have a mortgage of £200,00 and equity of £180,00.  X transfers his ownership of the property to Y and Y pays X £90,000 for half of the equity and then becomes responsible for X’s half of the outstanding mortgage of £100,000.  In this instance the total consideration is £190,000 and therefore SDLT of £1,300 will be payable at the current rate*.

SDLT is not always payable, only if the chargeable consideration exceeds the SDLT threshold i.e. £125,000*. In the event that no SDLT is payable then a SDLT return must still be submitted to HMRC, the only exception to this rule is if the consideration is less than £40,000. 

As part of the legal work we carry out for you during a Transfer of Equity the SDLT return is prepared (based on the information you supply to us) and submitted to HMRC on your behalf, at no extra cost.

If you are considering a change of ownership, please contact us for further advice.

Joanne Oldfield

*assuming that these are not classed as second properties for SDLT purposes