Do you pay tax on a transfer of equity piggy bank and calculator
Don't get caught out with a HMRC penalty by not filing and paying tax due on a transfer of equity. You can always contact us if you need any help on what to do, as we handle the whole transfer of equity process.


 
 

Do you pay tax on a transfer of equity?

26/11/2022
(Last Updated: 29/11/2023)
4,032
5 min read
There are transfer of equity tax implications even if you gift the property for no money. The tax that is payable includes:


The amount of tax you pay and how you file your tax return vary depending on the tax and we'll explain all of these below along with ways to save on the tax payable. Read more - What are the Transfer of Equity Costs?

What is a transfer of equity?
A transfer of equity is the name given to the process where legal owners of a property add or remove a legal owner from the legal title at the Land Registry. Here are a few examples:




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Do you pay stamp duty on a transfer of equity?

Stamp Duty is payable on a transfer of equity on:

  • the chargeable consideration; at
  • the stamp duty rate applicable to you.

What is the consideration?
If you are transferring equity and the transaction provides an individual with an interest in land, stamp duty land tax (SDLT) or land transaction tax (LTT) is payable and the amount you pay is based on the chargeable consideration given for it. Chargeable consideration is defined in the Finance Act 2003, Schedule 4, Stamp duty land tax: chargeable consideration and confirmed by HMRC with examples here https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm04040.

Consideration can be cash changing hands or the taking on of a debt (such as a mortgage or personal loan). To work out the total consideration, you add the cash/money being paid for the assignment and the new owner’s share of the existing mortgage/loan debt. If the total consideration exceeds the stamp duty threshold, then stamp duty is payable at the prevailing rate.

What is the rate of stamp duty chargeable?
Stamp duty is charged as a percentage of the consideration of the transfer. There are 3 types of percentages that could be applied depending on which ones apply to any of the parties to the transfer. You add all of the applicable %s together and this is the percentage of the consideration that you pay.

Standard Rate
Additional Rate
Non-UK Resident
Applicable on all transactions and is split into a tier system based on the consideration. Under a certain amount of consideration there is no SDLT to pay.
3% is chargeable if any of the parties have an interest in any other property around the world, as long as the consideration is above £40,000.
2% is chargeable if any of the parties are a Non-UK Resident. Read more - Additional rate for Non-UK Resident.

Examples of consideration for a transfer of equity:
Current Owners
New Owners
Details
Consideration
Husband
Husband & Wife
Property Value: £250,000
Current mortgage debt: £200,000
% Equity being transferred: 99%
Money being paid for equity: £0

Consideration: Money changing hands of £0 added onto mortgage taken on £198,000 (99% of £200,000)

The rate of stamp duty depends on if either party owns an interest in another property anywhere in the world and if either party is a non-UK resident. Use our Calculator below to confirm what tax is payable on £198,000 consideration.

Unmarried Couple
The boyfriend
Property Value: £250,000
Current mortgage debt: £200,000
% Equity being transferred: 50%
Money being paid for equity: £25,000

Consideration: Money changing hands of £25,000 added onto mortgage taken on £100,000 (50% of £200,000) equals £125,000.

The property is the client's main and only residence. Use our Calculator below to confirm what tax is payable on £125,000 consideration.


Enter the market value of the property
(or the value of the share being purchased or transferred)
£0
£0
£0.00

File your SDLT return and pay your tax
Any stamp duty land tax should be declared and paid to HMRC within 14 days after completion of the transaction, otherwise you may incur penalties. You can file your stamp duty land tax return with HMRC by clicking here - Submit your SDLT Return and pay any liability by clicking here - Pay your SDLT



Do you pay capital gains tax on transfer of equity?

Capital Gains Tax (CGT) is payable if you transfer equity on a property that isn't your Principal Private Residence (PPR) to a child, sibling or a person that is not your spouse or civil partner. Read more - Capital Gains Tax on Property for Married Couples.

You don't pay CGT if the property is your only home.

To calculate what capital gains tax you have to pay you need to:

  • calculate the gain for the equity sold; at
  • the CGT rate applicable to you over your allowance.

How do I calculate the CGT on a Transfer of Equity?
If the rate paid for the equity is the percentage of the market value equal to the equity being bought then this is the figure you use to calculate the CGT. If, however, the amount paid for the equity is under market value, then you need to replace the price paid with the market value to work out the gain or loss. You can use the Government site to calculate your rate: HMRC - Calculate your capital gain.

What is the CGT rate?
The Capital Gains Tax on residential sale profit is as follows:
 
Tax Band
Income Tax Band 
Capital Gains Tax Rate (chargeable on profits)
Basic rate income tax payer
£0 to £50,270
18%
Higher rate income tax payer
Over £50,271
24% (post 6th March 2024 budget)
 
Non-UK Residents pay a flat rate of 28% for any gain.
 
You have a tax free allowance of £3,000 for 2023-24.
 

File your CGT return and pay your tax
Any capital gains tax should be declared and paid to HMRC within 60 days after completion of the transaction, otherwise you may incur penalties. You can file your tax return with HMRC by clicking here - Self Assessment: Capital gains summary SA108 Form.

You have an annual tax free CGT allowance, which for 2023-4 is £6,000, but is due to be cut to £3,000 starting April 2024. The up to date figure is here - Capital Gains Tax allowances. Remember, though, there is no capital gains on home sale if it has always been your Principle Private Residence.

Frequently Asked Questions
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Andrew Boast of Sam Conveyancing
Written by:
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh Bailey, Digital Marketing Manager
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Caragh is an excellent writer in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.


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