Is stamp duty payable when transferring equity?

When property owners are considering a transfer of equity, in order to transfer the property to another person, they will need to understand the tax implications of this move. Stamp duty may or may not be due on a land or property transfer between individuals as it depends on the circumstances. Let’s take a closer look.

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Understanding equity and transfers

When we talk about equity, we describe the proportion of a property or land that the owner wholly owns. This means the value of the asset, less any remaining mortgage outstanding on it. A transfer of equity, or a capital transfer, happens when the owner decides to add a person to the title of ownership or remove them from it. The owner may also decide to fully transfer the property to someone else.

A transfer of equity solicitor will tell you that there are a wide range of situations in which you can undertake an equity transfer. Common examples include: selling a property share, buying out a joint owner or ex-partner, gifting a property to a child, adding a new partner to the property title or organising your inheritance tax affairs.

Why might someone transfer equity?

Capital transfers happen for many reasons. Couples get divorced, people get married again, or property shares may transfer as part of a business financing arrangement or between companies. In many cases, property is gifted to children.

What are the implications of stamp duty?

Stamp Duty Land Tax (SDLT) is due to HMRC when you buy property in the UK. The tax depends on your situation as a buyer and the purchase price. The tax is called different things in Wales and Scotland, but it works in broadly the same way.

What are stamp duty thresholds?

The threshold is £250,000 for a residential property and £425,000 for a first-time buyer who is buying a home worth under £625,000. For other types of property and for land transactions, the threshold starts at £150,000. A transfer of equity solicitor can provide tailored information to your individual circumstances and the necessary calculations.

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Is Stamp Duty due on equity transfers?

This will depend on the circumstances. A transfer of equity solicitor looks into the details of your circumstances and then assesses whether stamp duty is due, and how much. It will depend on the amount of transferred mortgage debt plus the amount originally paid for the asset, the recipient of the transfer and their tax status.

Usually, where taxable considerations exceed SDLT thresholds and capital is being transferred between individuals, the tax will be due. However, there are some exemptions. If the property, or a share in it, is given to a family member or a partner, without consideration, there is unlikely to be any Stamp Duty Land Tax obligation.

The best way to work out your obligations when transferring equity is to speak to a solicitor for specialist advice and guidance.

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