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Stamp duty on transfer of property between spouses

Andrew Boast

28/10/2019

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. The reason for this is that stamp duty land tax is payable on the consideration and as you'll find out below, the taking on of more of the mortgage debt for tax purposes, is classed as consideration and as such stamp duty is payable at the prevailing rate. Click here to find out How to reduce the SDLT payable on a transfer to your spouse.

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, however there still could be stamp duty to pay. 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 Land Tax (SDLT) if you transfer an interest in land or property to your partner 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.

Use our free online stamp duty calculator for transfers to your spouse.

Transfer of Equity Stamp Duty Land Tax Calculator

Money Changing Hands

(money given by the party receiving the equity)

What is the total Existing Debt on the property?

(this is the balance of any mortgage and/or loans as at today’s date)

What percentage of the existing debt is being taken on?

(For example, if you jointly only the property at the moment and change the ownership to 99/1, then you are taking on 49% extra of the existing debt)

Is there any other consideration given for the equity?

(the value of any given goods, works or services)

Existing Debt taken on

£0

Total Consideration for the Transaction

£0

Are you Married?

Yes

Second Home?

Yes

Stamp Duty (If you are not married and do not have a second home)

£0

You are responsible for paying the correct stamp duty based on your own circumstances. 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).

Do you need help evidencing an unequal share of property for Income Tax purposes?

We specialise in the transferring of property between married couples for income tax purposes and our solicitors can help you with:

Drafting a deed of trust for Form 17
Transfer of Equity to add partner to the legal title
Selling a property

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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 will not apply as a transfer between spouses is disregarded as above."

Source: HMRC - SDLT - higher rates for additional dwellings: purchasers with a spouse or civil partner

How to reduce the SDLT payable on a transfer to your spouse

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).