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TAX TIP TUESDAY: Stamp Duty Land Tax – Transfer of Ownership

Our 5-minute read – Tax Tips – for UK doctors and dentists will help you save tax, get organised with your tax affairs and make sure you meet important deadlines with ease.

This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice. 

Stamp duty land tax (SDLT) is due whenever land or property, either in part or in whole, is transferred and something (not necessarily money, but something of value – referred to as the ‘chargeable consideration’) is provided in exchange.

We recently provided an overview of new SDLT changes, but there are certain situations that merit further explanation because how much you’ll pay differs based on the circumstances.

It might come as a surprise that SDLT isn’t just due when a property is sold.

It may also be due in some cases where you might not expect, where property dealings involve life events such as marriage, entering into a civil partnership, moving in with a long term partner, and/or divorce.

Keep in mind that even in these special circumstances, consideration thresholds still apply. (See chart below.)

However, in these situations, often no money exchanges hands, and the consideration may come in the form of a debt transfer if the couple is now sharing the mortgage, or as a buyout in the case of a divorce.

Stamp Duty Land Tax Rates

Examples of SDLT

Scenario 1:  If a couple move in together to a house that one partner already owns that costs £230,000 and they share ownership 50/50, the consideration sits at £115,000. No SDLT is due if the property is worth up to £125,000. As this is under the threshold, no SDLT is owed.

Scenario 2:  If the home the couple lives in is worth more than £250,000 and each spouse assumes 50% responsibility for the mortgage, then SDLT would be due. This is the case for any time that your share of the property is valued at over £125,000. So, if the mortgage on the property is £300,000, each person’s share is worth £150,000. As the first £125,000 is free from stamp duty, you would owe 2% on the remaining £25,000.

Scenario 3: If one partner gifts a portion of the property to the other, no matter how much it is worth, no SDLT is owed.

Scenario 4: There are times when property ownership isn’t being combined with another party but reduced to a single owner, like in a permanent separation (break up for unmarried couples or dissolution of a civil partnership) or divorce. In these cases, no SDLT is due, as long as shares are split equally.

Plan ahead – speak to financial experts

If you’re celebrating the union of yourself and your partner, either legally or residentially, it’s important to keep consideration thresholds in mind in order to strategically reduce the amount of stamp duty land tax you will owe.

If you’re hoping to save as much tax as possible in every area of your life, be sure to contact us. We’ll help you build a financial plan that maximises your savings and minimises unnecessary tax bills.

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