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Could you be paying Stamp Duty Land Tax unnecessarily?

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If you’ve bought a property at some point in your life then you will be familiar with the term stamp duty (or Stamp Duty Land Tax (SDLT) as it is known in full). Even if you haven’t, I’m sure most people have at least heard of it.

SDLT is paid when purchasing residential properties over £125,000. But what is less well known is that you may need to pay SDLT when transferring the ownership of a property to another person in exchange for a monetary value (called ‘consideration’ by HM Revenue and Customs).

There are a number of factors that can affect whether SDLT is applicable, including whether the transfer is a gift, what the total value of the transfer is and who will be responsible and liable for paying the mortgage.

This final factor is an important one. The transfer of a share of the mortgage can be treated as ‘consideration’ for SDLT purposes and can give rise to an immediate tax charge.

Don’t get caught out by Stamp Duty Land Tax when transferring property between joint owners.

If the person who is giving the property retains the liability for the mortgage then it is possible to reduce or eliminate the SLDT charge and we can advise you on whether this is possible for your transfer.

What is the threshold of SDLT for transfer of ownership?

While SDLT must be reported to HMRC if the ‘consideration’ is more than £40,000, SDLT will not start to become payable on residential property until the ‘consideration’ exceeds £125,000.

So, for example, if a buy to let property has a mortgage of £350,000 and the ownership ratio changes from 90:10 to 50:50 there may be ‘consideration’ of £140,000 – and SDLT of £300.

More information

The HM Revenue and Customs website explains in more detail what Stamp Duty Land Tax is and what this means for joint ownership, however if you have any questions or would like to discuss a property transfer that you want to make, then please contact Tom Lacey, Chartered Tax Adviser at Moore Blatch solicitors.