Do I pay stamp duty land tax (SDLT) on a transfer of equity?

When transferring equity in a property, you may need to pay Stamp Duty Land Tax (SDLT) only if there is chargeable consideration involved. Chargeable consideration includes any cash paid or mortgage taken on as part of the transfer. SDLT becomes payable if the total value of this consideration exceeds the current threshold—£250,000 for residential properties until March 2025, then £125,000 afterwards.

No SDLT is due if the transfer involves no payment or mortgage, such as in cases of gifting, inheritance, or transfers under a divorce court order. Therefore, if you’re simply adding or removing a name without a financial exchange, SDLT typically does not apply. It’s important to check the latest rules and seek legal advice to understand your specific situation fully.

In this blog, we explain what transfer of equity means, the rules around SDLT liability and how stamp duty land tax on transfer of equity is calculated.

What is a transfer of equity?

A transfer of equity is the legal process of adding or removing someone from the ownership of a property without selling it, where at least one original owner remains on the title. It often occurs in situations like marriage, divorce, or gifting property to family members.

Equity refers to the portion of the property you own outright, calculated as the property’s current value minus any outstanding mortgage. For example, when removing a partner but adding multiple additional owners, such as children or grandchildren.

Why do people undertake a transfer of equity?

There can be many reasons why and individual considers transferring equity. For example:

• Divorce or separation.
• A new relationship (to add a new partner to the deeds).
• Marriage or civil partnership.
• Property transfer to one individual if you have a share in a jointly owned property.
• Buying out an ex-partner.
• Gifting a property or share in a property to a family member such as a child or grandchild.
• Inheritance Tax (IHT) planning.
• Transfer property from a company.

Is SDLT payable on transfer of equity?

Whether SDLT is payable on transfer of equity will depend on the circumstances, SDLT may be payable when transferring equity in a property or land, from one person to another. More details are below for a variety of circumstances.

What is the Stamp Duty threshold on a transfer of equity?

SDLT is payable if the chargeable consideration exceeds £250,000. Chargeable consideration is calculated on transfer of equity as follows:

The amount of debt transferred or taken on (the mortgage) plus the amount being paid for the equity.

If equity transferred is in a second property - for example, a holiday home or a buy-to-let - the SDLT threshold is £40,000.

What happens when there is a mortgage on the property being transferred?

If there is still an existing mortgage on the property when it is transferred, the person leaving the deeds will also need to be released from the mortgage and its terms and conditions. You cannot be removed from the deeds of the property without clearing or transferring the debt used to secure it initially.

Equity covers the percentage of your property you own. The rest will be owned by the bank or building society with which you have a mortgage and for that reason, you can’t release it without informing and agreeing the transfer with them.

Depending on the circumstances of your transfer of equity you can do the following if a mortgage is involved:

• Pay off the mortgage (otherwise known as discharging which also refers to refinancing or filing for bankruptcy).
• Obtain mortgage lender approval to transfer the property as part of a buyout – if the co-owner purchases your share of the property, for instance.
• Re-mortgage the property to secure enough funds to pay off/discharge the current mortgage. For example, if you were separating with a partner.

When is Stamp Duty payable on a transfer of equity?

When you transfer equity from one person to another and the chargeable consideration exceeds the threshold, SDLT may be payable.

• Consideration Exceeds Threshold
  

  SDLT is payable if the total chargeable consideration, such as cash paid or mortgage taken on, exceeds the current SDLT threshold (£250,000 for residential properties until March 2025).

• Existing Ownership Doesn’t Exempt SDLT
  

  Even if the person receiving the equity already owns part of the property, SDLT applies if the total consideration involved in the transfer exceeds the threshold.

• Transfers in Marriage or Civil Partnership
  

  When equity is transferred due to marriage, civil partnership, or moving in together, SDLT may be due if the chargeable consideration exceeds the threshold.

• Unmarried Couples and Joint Owners
  

  Joint owners who are unmarried or not in a civil partnership may have to pay SDLT when transferring interests in property between themselves.

• Transfers to or from Companies
  

  When property is transferred to or from a company, SDLT may be charged based on the property’s market value rather than just the consideration paid.

When is SDLT NOT payable on transfer of equity?

Stamp Duty Land Tax (SDLT) is not payable on a transfer of equity in certain situations where no chargeable consideration is involved or specific reliefs apply:

• Separation or Divorce
  

  SDLT is not due if the transfer is part of a court order or agreement related to divorcing, dissolving a civil partnership, annulment, or legal separation. This relief ensures that transfers during these proceedings are exempt from SDLT.

• Gifting Property
  

  When equity is transferred as a gift, meaning no money or mortgage is exchanged, SDLT is generally not payable. For example, parents or grandparents gifting property shares to children or grandchildren usually do not trigger SDLT.

• Inheritance
  

  If you inherit a property or share in a property through a will and no payment is made, SDLT typically does not apply. Even if you take over the deceased’s mortgage, this does not usually create an SDLT liability.

Summary

Equity transfer can happen for all sorts of reasons, whether it’s a marriage legally separating, divorce, new civil partnership or marriage, family members being passed equity, tax purposes for IHT planning, or a new person taking ownership in a new relationship.

How you transfer equity and whether stamp duty land tax is payable on transfer will depend on the circumstances involved. There are further considerations if there is mortgage debt on the property as well. For these reasons, it’s wise to seek professional advice before making a transfer of equity.

For tailored tax advice on SDLT and property transfer or equity transfer, contact our expert team today. You can contact our team on 0330 088 6686, or email on info@dnsaccountants.co.uk.

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