Stamp Duty on Transfer of Property Between Spouses
06/01/2022
59,730
7 min read
Transferring your beneficial interest in property is common between spouses and civil partners, especially when looking to utilise each other's income tax free allowance (read our other articles on Capital Gains Tax on Property for Married Couples and How to file a Form 17 for Property Income).
What you may not know is that although you may have paid all of your stamp duty land tax when you purchased the property, if you are transferring equity to your spouse and no money is changing hands, you may still have to pay stamp duty if you have a mortgage, however you MAY NOT have to pay the second home rate.
Stamp duty land tax is payable on the consideration and, as you'll find out below, if your partner is taking on of more of the mortgage debt for tax purposes then this is classed as consideration and as such stamp duty is payable at the prevailing rate. There are exemptions if you are divorcing or are legally separating.
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Is second home stamp duty payable for married couples?
The stamp duty on transfer of property between spouses changed on the 22nd November 2017 in relation to the additional rate of stamp duty.
In this article we explain the stamp duty liability where a husband or a wife owns a property solely and is looking to complete a transfer of equity to jointly own the property with their spouse.
There are other ways of sharing the beneficial ownership which we explain here - How to transfer ownership of property to your wife or husband
What are the stamp duty rules for a transfer of equity?
You don’t pay Stamp duty on transfer of property between spouses if it's done as part of an agreement or court order because you’re either:
- divorcing
- 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 Stamp Duty Land Tax threshold.
What stamp duty is payable when transferring interest in a jointly owned property?
Stamp duty land tax is payable on the total consideration being paid which is set out within the Finance Act 2003, Schedule 4, Stamp duty land tax: chargeable consideration. 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 share of the property being transferred 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.
The payment (consideration) can take the form of cash, the giving of goods (giving a personal possession in exchange for the land/property), providing works or services (giving work or a service in exchange for the land or property), release from a debt, transfer of a debt, including the balance of an outstanding mortgage.
For Example: Ian owns a property valued £300,000 with a £275,000 existing mortgage. Jane, the wife of Ian, is transferred onto the legal title. Jane owns 99% of the beneficial interest and Ian owns 1% and Jane doesn't pay Ian any money for her share, however Jane takes on 99% of the existing debt (the mortgage on the property). Stamp duty land tax is payable on the consideration based on 99% of the existing debt of £275,000 which equates to £272,250 as she takes on 99% of the existing debt.
How much is chargeable if no money changing hands?
Stamp duty is payable if one of the parties is released of their share of the mortgage debt. Being released from being liable from debt is consideration.
Go to the SDLT Manual - How much is chargeable: Non-cash consideration: Assumption or release of a debt.
HMRC example for additional stamp duty for spouses
"Mr Smith is transferring 50% of a buy-to-let property that he owns to his wife Mrs Smith. Mrs Smith is paying some cash and taking over responsibility for half the mortgage debt. Mrs Smith owns no other residential property but Mr Smith owns a number of other buy-to-let properties.
For transfers before 22 November 2017, the higher rates will apply to the transfer as Mr Smith owns other residential properties. As a married couple other residential property owned by either spouse is taken in to account in determining whether the higher rates apply.
For transfers on and after 22 November 2017, the higher rates rules disregard transactions solely involving the transfer of interests between spouses or civil partners while they are treated as living together on the date of purchase. ‘Living together` takes the definition in section 1011 of the Income Tax Act 2007. A married couple or civil partners of each other are treated as living together unless they are separated under an order of a Court, or they are separated by a formal deed of separation, or they are in fact separated in such circumstances that the separation is likely to be permanent.
If (before or after the transaction takes place) someone other than the spouses or civil partners has an interest in the property, the transaction will still count as a higher rates transaction. For example, a transaction would not be disregarded where an interest owned by a wife and her otherwise unrelated business partner is transferred to her husband."
Frequently Asked Questions
As we have seen above, stamp duty land tax is payable when you transfer an interest in land to your wife/husband and SDLT is calculated based on the consideration of the transaction. As it is unlikely a husband or wife will pay for the transfer of the interest, then the consideration will be based on the existing debt taken on. Here if an example of how to reduce the consideration for the transaction:
Husband transfers beneficial interest to wife
Ian solely owns a property valued £300,000 with a £275,000 existing mortgage. Ian assigns 99% of the beneficial interest to Jane but doesn't add Jane to the legal title and doesn't add Jane to the existing mortgage debt. Jane doesn't pay any money for the beneficial interest and doesn't take on any of the existing debt (the mortgage on the property) or any other debt; there is no consideration for the transfer. Ian is solely named on the mortgage and solely liable for the repayment of the existing debt. Stamp duty land tax is payable on the consideration, however the consideration for the transaction is nil.
You should call HMRC for help with Stamp Duty Land Tax queries and to confirm your own personal liability on 0300 200 3510 Opening times: 8.30am to 5pm, Monday to Friday (closed weekends).
You do not have to pay Stamp Duty Land Tax when you transfer an interest in land or property to your partner as part of an agreement or court order because you’re divorcing or dissolving a civil partnership. This includes annulling your marriage or being legally separated.
In these transaction you do not need to tell HMRC about the transfer, even if the value is more than the stamp duty threshold.
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