Joint Mortgage Sole Proprietor Stamp Duty Land Tax Implications, explained by SAM Conveyancing
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If your borrower non-proprietors have no beneficial interest in the property, they shouldn't affect your SDLT liability.

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Joint Mortgage Sole Proprietor Stamp Duty

10/06/2022
(Last Updated: 29/11/2023)
2,459
6 min read
A Joint Mortgage Sole Proprietor arrangement can have second home stamp duty implications even if some of the joint owners aren't named on the legal title. The following article examines scenarios that could give rise to stamp duty land tax. There are ways to avoid second home stamp duty and invest in the property - click to find out how - How to avoid stamp duty on second home

What are the HMRC rules for higher rates for additional dwellings?

From 1 April 2016 higher rates of stamp duty land tax (SDLT) apply to purchases of additional residential properties such as second homes and buy-to-let properties. The additional rate is 3% of the purchase price for properties valued over £40,000.

For example, if a property is worth £250,000 and higher rates apply you pay the normal stamp duty of £2,500 plus the additional 3% of £7,500; £10,000 in total.



Scenario 1: Having a future entitlement (beneficial interest) in the new property when owning another property

There are some cases where the parties on the mortgage but not on the legal title want to retain a beneficial interest in the property. Here are some common examples:

  • Parents, who own another property, are jointly on the mortgage with their daughter who is going to be the sole legal owner of the property. The parents are investing a large sum of money to help fund the deposit and they want to be repaid their deposit upon the sale of the property; or
  • A boyfriend is jointly on the mortgage, but not a legal owner of a property which his partner is the sole legal owner of and he wants to invest in the property. The boyfriend doesn't want to pay the second home stamp duty because he owns an interest in another property.


"Where an individual (who is not a spouse or civil partner of another purchaser) is one of the purchasers of a dwelling but they will have absolutely no beneficial interest in the property, they will not be treated as a joint purchaser of that dwelling. This would have to be evidenced in writing. Any future entitlement to capital proceeds from the sale of the property, to income or to occupy the property would mean that they do have a beneficial interest."

In both examples the parties on the mortgage own another property which they aren't going to sell but are looking to be repaid "capital proceeds from the sale of the property". If the parties on the mortgage want a beneficial interest in the property so they can be repaid money on sale, without selling their main residence before buying, then the purchase transaction will attract second home stamp duty of 3% of the property value.

It is also noted that in order for the joint purchasers to prove to HMRC that they have zero beneficial interest in the property that they need to "evidence this in writing". A common method for doing this is an executed deed of trust stating that the parties on the mortgage are not legal owners and have a zero beneficial interest in the property.

Another complication arises though if your intention is to live in the property and we examine this in Scenario 2.

Do you need a Deed of Trust to establish zero beneficial interest?

Complete your intentions online and we'll draft your Deed of Trust for Tax Compliance, for a fixed fee of £299 INC VAT.




Need tax advice on your property transaction?

  • Get up-to-date property tax advice on SDLT, CGT, IHT, Personal versus partnership versus company structure.
  • Free 15-minute initial consultation with a qualified accountant from our panel of tax advisors.
  • Ask your tax questions and get guidance on what you can do next.
  • If there is some further accountancy work required, then you'll be quoted for this as a separate piece of work with no obligation to purchase.


Scenario 2: Joint borrower is entitled to occupy the property

In the example above with the boyfriend and partner buying together we saw how the boyfriend couldn't have a beneficial interest in the property without paying second home stamp duty, however HMRC view the right to occupy as a benefit as well.

"Any future entitlement to capital proceeds from the sale of the property, to income or to occupy the property would mean that they do have a beneficial interest."

If the boyfriend was intending to live at the property with his partner, then he would need to evidence in writing, normally in a deed of trust, that he has "no future entitlement....to occupy the property". Any future entitlement to live in the property gives rise to a beneficial interest and second home stamp duty would apply.

Scenario 3: Rental income

If it is the intention of any of the parties on mortgage in the examples above to be paid income from the property such as rent, then this gives rise to a beneficial interest and second home stamp duty is payable.

"Any future entitlement to capital proceeds from the sale of the property, to income or to occupy the property would mean that they do have a beneficial interest."

Scenario 4: Purchasers with a spouse or civil partner

If the party who is jointly on the mortgage but not on the legal title is a spouse or a civil partner, and they own another property that they aren't selling to buy the new property then second home stamp duty is payable.


"Where an individual with a spouse or civil partner purchases an interest in a dwelling and their spouse or civil partner is not a joint purchaser, the spouse or civil partner will be treated as a joint purchaser in respect of the transaction [Para 9].

This means that where a purchaser is married or in a civil partnership, if Conditions A to D are met by either the purchaser or their spouse or civil partner, the transaction will be a higher rates transaction."

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
Reviewed by:

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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