What is the Stamp Duty on a Gifted Property?
- Stamp Duty Land Tax (SDLT) is not payable on a gifted property as long as there is no 'chargeable consideration' involved.
- 'Chargeable consideration' is the legal term for any monetary value exchanged. Crucially, this includes taking on an outstanding mortgage or other debt.
- SDLT becomes payable if the value of the mortgage you take on exceeds the current nil-rate threshold of £125,000 for residential properties.
- A gift of a property from an individual to a company you are connected with will almost always trigger SDLT based on the property's market value. An exemption is only available in the specific scenario of a transfer from a genuine, qualifying business partnership.
- While a gift may be exempt from SDLT, it can have Inheritance Tax and Capital Gains Tax implications.
- A Deed of Gift is the correct legal document for transferring property, and the cost starts from £229.17 EXC VAT.
- If SDLT is payable, a Stamp Duty return must be filed with HMRC within 14 days of the transaction.
The Core Rules for Stamp Duty on a Gifted Property
The rules for Stamp Duty on a gifted property are simple in principle, but the details are where mistakes are made. SDLT is a tax on a property transaction’s ‘chargeable consideration’. This is the legal term for any money or money’s worth that changes hands between the parties.
When you gift a property and no money is exchanged, there is no consideration, and therefore no Stamp Duty Land Tax is payable. The transaction is essentially free from an SDLT perspective.
This principle is rooted in legislation. Under section 1 of Schedule 4 Stamp duty land tax: chargeable consideration, it states:
The chargeable consideration for a transaction is, except as otherwise expressly provided, any consideration in money or money’s worth given for the subject-matter of the transaction...
However, the key exception to this rule is a property with an outstanding mortgage. If the person receiving the gifted property takes on the mortgage, the value of that mortgage is considered 'chargeable consideration'.
If this value exceeds the current nil-rate SDLT threshold of £125,000, Stamp Duty becomes payable on that amount. This is a common and costly mistake for many families.
- Get up-to-date property tax advice on SDLT.
- 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.
Gifting Property and Stamp Duty: Real-Life Examples
Example 1: A Gift with No Mortgage
A parent owns a house worth £500,000 in their sole name. There is no mortgage or other debt secured on the property.
They legally transfer the property to their child as a gift, with no money or debt exchanged in return.
In this case, since there is no 'chargeable consideration' (i.e. nothing of monetary value changes hands), no Stamp Duty Land Tax is payable on the transfer.
The child does not need to file an SDLT return, as the value of the consideration is £0.
Example 2: A Gift with an Outstanding Mortgage
Two brothers jointly own a property worth £500,000 with a remaining mortgage of £250,000.
One brother wants to gift his 50% share to the other brother. The second brother agrees to take on the first brother’s share of the mortgage, a debt of £125,000.
In this scenario, the debt taken on by the receiving brother is considered 'chargeable consideration' for SDLT purposes.
Since the value of the debt (£125,000) meets the current nil-rate threshold, no Stamp Duty is payable, but a tax return must be filed with HMRC.
Had the outstanding mortgage been just £1 more, the tax would be payable on the full amount.
Looking for a Stamp Duty loophole?
There isn't a "loophole" to avoid paying Stamp Duty, but there are ways you can effectively reduce the amount you pay on a property purchase or a transfer.
Other Taxes to Consider
While a gift may be exempt from Stamp Duty Land Tax, remember that it can have Inheritance Tax (IHT) and Capital Gains Tax (CGT) implications. Getting this wrong can lead to a substantial tax bill for your loved ones.
Inheritance Tax (IHT) and the 7-Year Rule
When you gift a property, it is considered a Potentially Exempt Transfer (PET) for IHT purposes. This means that if you live for 7 years after making the gift, its value will not be included in your estate when you die, and no IHT will be due.
If you die within the 7-year period, the property's value may be added to your estate, and IHT may become payable.
A key exception to the 7-year rule is a Gift with a Reservation of Benefit (GROB). This occurs if you gift a property but continue to benefit from it in some way, such as by continuing to live there rent-free.
If this happens, the 7-year clock never starts, and the property's full value will remain part of your estate for IHT purposes.
Capital Gains Tax (CGT)
When you gift a property that is not your main home (e.g., a buy-to-let or second home) to a connected person, such as a family member, HMRC treats the transaction as if you had sold the property at its full market value.
You may therefore have to pay CGT on any increase in the property’s value from the time you originally acquired it to the time of the gift.
The recipient of the gift does not have to pay CGT on the transfer itself, but they may have to pay it if and when they later sell the property.
It's important to note that Private Residence Relief may exempt you from CGT if the gifted property was your only or main home throughout your ownership.
Get a Fixed Fee quote today for a gifted property transfer between family.
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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 is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
