Transfer of Equity Stamp Duty
You have to file a Stamp Duty Land Tax (SDLT) Return to HMRC if there is any consideration as part of the transfer of equity. Consideration could be money changing hands or debt taken on like a mortgage. Within 14 days of the transfer, you must pay stamp duty on the transfer of equity where there is consideration over £40,000 if a buy-to-let or over £250,000 if your principal place of residence IE your home - unless the transfer is part of a divorce/legal separation.
The SDLT transfer of equity rule is different for married couples. Read more - Stamp duty on transfer of property between spouses.
There are also other taxes to consider with a transfer of equity such as Capital Gains Tax and income tax that I explain in detail below with ways to reduce the tax payable.
What is transfer of equity stamp duty?
Stamp duty land tax applies to any land transfer between one party to another where there is consideration. The rate of stamp duty payable differs for properties in England and those in Wales. Read more - What are the Transfer of Equity Costs?
| Property Price | Standard Rate of Stamp Duty | Additional Home Rate (updated post Oct 2024 budget) | Non UK Resident Rate |
| £0 - £125,000 | 0% | 5% | 2% |
| £125,001 - £250,000 | 0% | 5% | 2% |
| £250,001 - £925,000 | 5% | 10% | 2% |
| £925,001 - £1.5 million | 10% | 15% | 2% |
| Over £1.5 million | 12% | 17% | 2% |
When buying someone out of jointly owned property, you need to factor in the stamp duty the purchase attracts as part of the settlement.
Chargeable consideration is defined in the Finance Act 2003, Schedule 4, Stamp duty land tax: chargeable consideration. Consideration can be:
- cash changing hands; added onto
- the taking on of a debt (such as a mortgage or personal loan)
Add the cash/money being paid for the assignment and the new owner’s share of the existing mortgage/loan debt to work out the total consideration. If the total consideration exceeds the stamp duty threshold, stamp duty is payable at the prevailing rate. Any stamp duty land tax should be declared and paid to HMRC within 30 days after the completion of the transaction; otherwise, you may incur penalties.
SDLT Transfer of Equity Example
For Example: Ian owns a property in England valued £300,000 with a £275,000 existing mortgage. Jane, Ian's wife, 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. Stamp duty land tax is payable on the consideration based on 99% of the existing (mortgage) debt of £275,000, which equates to £272,250 as she takes on 99% of the existing debt. As Ian and Jane are married, there is no second home stamp duty. However, there is a standard rate stamp duty for the transaction. Click to use our up-to-date stamp duty calculator.
Suppose someone owns 99% of the beneficial interest. In that case, they are treated for tax purposes as owning 99% of the existing debt/s (mortgage or second charges) over the property, even if all of the parties named on the mortgage are joint and severally liable for the mortgage.
Do you pay any other tax on a transfer of equity?
In addition to SDLT, you must consider the Capital Gains Tax and Income Tax if the property isn't your residential home, IE, an investment/buy-to-let.
Capital Gains Tax
Capital Gains Tax (CGT) is payable if you transfer equity on a property that isn't your Principal Private Residence (PPR) to a child, sibling or a person that is not your spouse or civil partner. Read more about Capital Gains Tax on Property for Married Couples.
You don't pay CGT if the property is your only home. To calculate what capital gains tax you have to pay, you need to:
- calculate the gain for the equity sold at
- the CGT rate applicable to you over your allowance.
You can use our Capital Gains Tax Calculator to transfer equity.
If the rate paid for the equity is the percentage of the market value equal to the equity being bought, then this is the figure you use to calculate the CGT. If, however, the amount paid for the equity is under market value, then you need to replace the price paid with the market value to work out the gain or loss. You can use the Government site to calculate your rate: HMRC - Calculate your capital gain.
| Tax Band | Income Tax Band | Capital Gains Tax Rate (chargeable on profits) |
| Basic rate income tax payer | £0 to £50,270 | 18% |
| Higher rate income tax payer | Over £50,271 | 24% (post 6th March 2024 budget) |
Any capital gains tax should be declared and paid to HMRC within 14 days after completion of the transaction. Otherwise, you may incur penalties. You can file your tax return with HMRC by clicking here - Self Assessment: Capital Gains Summary SA108 Form.
Income Tax
The income tax on a buy to let is shared in the proportions agreed within the TR1 when you transfer the equity.
Do you need a Transfer of Equity Solicitor?
We can handle the whole process in a matter of weeks with our panel of solicitors. We can help with:
- Transfer a party on or off the legal title
- Separation Agreements
- Gifted transfer for no consideration
Get a Transfer of Equity Quote
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.
